Goldman Sachs Group Inc said a large portion of its consumer lending business has lost nearly $3 billion since 2020, revealing for the first time the costly toll of the Wall Street giant’s Main Street push.
Ahead of its fourth-quarter earnings call next week, Goldman released financial information reflecting its new reporting structure. In October the bank announced a comprehensive restructuring that merged its core investment-banking and trading businesses into one entity, while asset and wealth management into another.
Marcus, Goldman’s consumer-banking arm, got off to a strong start in 2016.
Rivals JPMorgan Chase & Co and Bank of America Corp were posting big profits on the back of strong consumer businesses that carried them through rocky parts in their Wall Street operations. Goldman, long dependent on its gold-plated investment banking and trading arms, was wanted in on the action.
The bank introduced savings accounts, personal loans and credit cards. Its 2019 credit-card partnership with Apple Inc signaled its ambitions to become a bigger player in the business.
Goldman invested billions of dollars in Marcus. But it has struggled to scale up the credit-card business after early wins with the Apple Card. A long-awaited checking account never materialized.
The consumer unit was never profitable. In October, Goldman formally withdrew its plan to put the public in the bank.
The reshuffle parceled out the consumer business to different parts of the bank.
Prior to the change, it was under the same umbrella as Goldman’s wealth-management division.
Most of Marcus will be folded into Goldman’s new wealth and asset management unit. Some pieces, including credit-card partnerships with Apple and General Motors Co. as well as specialty lender GreenSky, are moving to a new unit called Platform Solutions.
Goldman disclosed on Friday that its Platform Solutions unit posted a loss of $1.2 billion on a pre-tax basis in the nine months ending September 2022. After operating expenses and set aside money, there is a loss of slightly more than $1 billion in 2021 and $783 million in 2020. To cover possible losses on the loan. The unit also includes transaction banking, which includes services such as enabling banks to send payments to each other, vendors and elsewhere.
Shares of Goldman closed Friday at $374, up nearly 1%.
The bank said it set aside $942 million for credit losses in Platform Solutions during the first nine months of 2022, up 35% from full-year 2021. The division’s operating expenses increased by 27% during the period. Consumer crimes are on the rise across the industry, after hovering around record lows for most of the pandemic.
Net revenue for Platform Solutions’ consumer platform segment, which reflects Credit Cards and GreenSky, totaled $743 million during the first nine months of 2022, up 75% from all of 2021 and up 295% from 2020. Goldman completed its acquisition of GreenSky last year.
The disclosure did not disclose financial details for Goldman’s consumer deposit accounts, personal loans and other parts of Marcus. Those business lines are included in the firm’s asset and wealth management division, which is profitable, and not material to the firm’s overall profit, according to people familiar with the matter.
According to people with knowledge of the matter, Goldman is in the process of closing the personal loan. It will end its checking account pilot for employees, one of the people said, while it considers other ways to offer the product. One possible option is pitching the checking account to workplace and personal-wealth clients.
As recently as this summer, Goldman executives were saying that the checking account would unlock new business opportunities for the bank.
Marcus has been a divisive topic at Goldman. Some partners, senior executives and investors were against continuing to pour billions of dollars into the effort, especially for checking accounts and other products that Goldman would develop on its own.
(Write to annaMaria Andriotis at annamaria.andriotis@wsj.com and Charlie Grant at charles.grant@wsj.com)