How much will it cost for Goldman Sachs to extricate itself from a mistake?
The Wall Street bank, long known for catering to big-name corporations and wealthy clients, on Tuesday revealed the latest fallout from its half-decade-long effort to expand into loans and savings products for the less wealthy set. Goldman said it had sold off some of those down-market loans and conceded defeat on others, to the tune of nearly $500 million in losses.
Even for a lender as large as Goldman, that’s no small sum. The bank made $3.2 billion in the first quarter — beating investor expectations and mostly sidestepping the recent deposit runs that roiled its smaller peers — but it would have been far more without those losses. The firm’s stock was down 3 percent in premarket trading after the release of the results.
The consumer banking arm, named Marcus after the bank’s founder, was started under Goldman’s previous chief executive, Lloyd C. Blankfein, and expanded under its current leader, David M. Solomon. Mr. Solomon has made little secret of his desire to get out of the business, and tipped earlier this year that the bank was looking to sell the unit, among other options. That Goldman is still holding on to part of the portfolio, however, is an indication that a complete exit did not come quickly.
Banks that make consumer loans, particularly smaller and regional lenders, have been under pressure since last month’s collapse of Silicon Valley Bank and Signature Bank. As an investment bank and corporate adviser, Goldman is mostly shielded from those pressures.
“The events of the first quarter acted as another real-life stress test, demonstrating the resilience of Goldman Sachs and the nation’s largest financial institutions,” Mr. Solomon said in a statement.