Goldman Sachs sells $1 billion of Marcus loans to Varde, further dismantling its consumer lending ambitions.
With an inverted yield curve and political turmoil heightening fears of recession, Goldman Sachs Group Inc GS has taken a hard look at their commitment to consumer financial services. Recently, they sold off approximately $1 billion of Marcus personal loan portfolio to Varde Partners for $470 million loss during Q1. This deal marks their second sale this year without plans for expansion according to Bloomberg News reports.
This move marks a definitive admission that the investment bank specializes in corporate clients and wealthy individuals and has given up trying to court Main Street. Marcus consumer banking initiatives, including its personal loans and high yield savings accounts were one of the main prongs of its strategy in courting Main Street consumers; but these attempts ultimately met with setback after setback, including several rounds of losses tied directly to its Marcus business. Last fall, it divided its consumer offerings into different reporting segments while folding Marcus into its Asset and Wealth Management division.
But Goldman continues to struggle in its consumer lending business despite having announced the reorganization plan. Recently, they reported a loss of $3.2 billion linked to their Marcus business, while CEO Lloyd C. Blankfein has signaled his intent to scale back direct-to-consumer lending efforts.
Goldman recently moved to offload its remaining Marcus loans by selling them at a significant discount to face value to Varde. Furthermore, it changed the status of its remaining Marcus loan book from held until maturity to available for sale, suggesting further sales may take place in future.
As Goldman reduces lending directly to consumers, they may explore opportunities in business-to-business payments. They announced in April a collaboration with Coupa that will streamline global B2B payments using Goldman’s transaction banking division TxB; Coupa customers will gain access to Goldman’s global FX liquidity network and payment solutions offered through Coupa.
Goldman Sachs Group Inc (GS.N) shares are up 0.4% to $206.40 in premarket trading Thursday morning. Through its operating subsidiaries, the Goldman Sachs Group provides investment banking, securities trading and commodities services. The Company operates three business segments: Global Banking & Markets; Asset & Wealth Management; Platform Solutions. Within Global Banking & Markets are financing, capital markets and equities services along with fixed income, equity and interest rate products that form its core services portfolio.
