Goldman Sachs, the renowned investment bank, is reportedly reevaluating its venture into the consumer lending sector. This comes amid internal disagreements and challenges faced by the bank in its partnership with tech giant Apple, according to a recent report by the Wall Street Journal.
Goldman’s consumer lending journey
Goldman Sachs had made headlines when it collaborated with Apple to introduce a joint savings account. However, the enthusiasm within the bank seems to have waned. Some insiders have expressed regret over the initiative, with one executive reportedly stating that the bank should never have ventured into this domain.
The bank’s recent decisions reflect this sentiment. Goldman Sachs is in the process of divesting from GreenSky, a purchase it made just a year ago, and has already offloaded a significant portion of its personal loan portfolio.
Key decision-makers within the bank are contemplating exiting the remaining consumer lending products. This includes the Apple credit card and other associated Apple products, as well as the General Motors credit card. While discussions with American Express have taken place, no concrete decisions have been made.
The bank’s foray into the credit card sector in 2019 had initially raised eyebrows, with many consumer banks viewing Goldman as a potential competitor. However, the bank’s recent actions suggest a shift in strategy, potentially marking the end of its consumer lending experiment.
Challenges and criticisms
The upcoming earnings report is anticipated to shed light on the bank’s performance in this sector. There are expectations of a decline in profits, and stakeholders are keen to hear from CEO David Solomon about the bank’s renewed focus on its primary Wall Street operations.
Internally, there has been criticism of the consumer lending venture. Many hold the view that the initiative has been more problematic than beneficial, with some pointing fingers at Solomon for the bank’s aggressive expansion in this area. The unit overseeing credit cards and GreenSky has reportedly incurred significant losses, and there have been regulatory concerns surrounding the card business.
The Apple partnership
The partnership with Apple has also faced its share of challenges. Issues with the Apple credit card’s loss rates have been a point of contention. Additionally, there have been discussions about allowing Apple to assume a larger role in the partnership, potentially taking on the responsibility of lending for new credit card expenditures.
Goldman Sachs has also been under scrutiny by the Consumer Financial Protection Bureau regarding its credit card account management practices.
Goldman Sachs’ journey in consumer lending has been tumultuous. With internal disagreements, regulatory challenges, and partnership issues, the bank is at a crossroads. The upcoming earnings report and decisions regarding its partnerships will be crucial in determining the future direction of this venture.
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