Goldman lost $1.2B in nine months at its newest unit

The set of businesses — including Goldman’s Apple Card — now grouped under the Platform Solutions segment racked up more than $1.2 billion in pre-tax losses in the first nine months of last year, with the decline accelerating each quarter.

This figure, published in a regulatory report on Friday, is intended to help shareholders and analysts prepare to track Platform Solutions once Goldman begins to break out its results in quarterly reports, starting Tuesday. But it also sheds new light on how much the expansion has been dragging on the New York-based firm’s bottom line.

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From early 2020 through the end of September, Platform Solutions’ pre-tax losses totaled $3 billion, the report reveals.

When figures for the latest quarter are added next week, that cumulative loss will approach $4 billion over three years and $2 billion for the year driven by loan-loss provisions, people with knowledge of the matter said.

The provisions of Platform Solutions for the first nine months of 2022 amounted to US$942 million, according to the report. At a time when loan-loss rates have been historically low, Goldman had said the rate on its consumer lending business had risen to an annualized mark of 2.9% after the period ending in September, a quarterly increase of 60 points. basic.

That rate is higher than its biggest consumer banking competitors. At the time, the bank had $14 billion in credit card loans and $5 billion in installment loans.

ambitious goal

The division is a scaled-down version of what was once Goldman’s lofty goal of attacking the consumer market: building a digital bank of the future that would become an industry leader. Instead, the company, rocked by persistent costs and the difficulty of creating new lines of business, decided to scale back its ambitions and reposition the pieces.

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Much of what remains mass-market is now on Platform Solutions, including card linking and installment lending. The transaction banking business line, which is now also part of this group, is probably the only profitable element.

Figures released Friday offer clues as to what Goldman has been spending to position the high-profile Apple Card, created through a partnership with Apple Inc.

The division’s $1 billion pretax loss reported for 2021 was tied primarily to Apple Card, people with knowledge of the figures said. And about $2 billion in 2022 will come mainly from Apple Card and installment lending platform GreenSky, according to the sources.

The question is whether Goldman will feel more pressure to relax on what executives have seen as investments now that spending is more readily visible to shareholders.

Goldman’s global consumer business was originally supposed to break even late last year. Executives at the new Platform Solutions division now expect it could hit it sometime in 2025, though no definite target has yet been set, according to people with knowledge of the matter.

Meanwhile, facing pressure to maintain profitability, CEO David Salomon is looking for other ways to reduce spending. This week, the company moved beyond annual underperforming staff cuts and embarked on one of the biggest rounds of job cuts in its history, including at its core banking and retail operations.

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