– the recurring themes of his bad press. In fact, it was leading Goldman into a big bet with no easy exit or downside protection.
When the bank laid out plans for its Marcus consumer banking arm and its credit-card business with partners such as Apple during Goldman’s first-ever investor day in January 2020, it was candid about losses it would take early on. But these were meant to peak at about $US1 billion pre-tax in 2020, with the consumer businesses and transaction banking moving into profit from 2023 onwards.
By my reckoning, Goldman’s adventures in consumer land are already close to being as costly as the fines and disgorgements it paidin the Malaysian government-linked 1MDB corruption scandal, which led to Goldman’s top executives having their bonuses slashed for 2020. The consumer-related losses aren’t as clear-cut as the 1MDB fines, to be fair. Some could be reduced if the economy improves and Goldman can release provisions put aside against bad debt in its remaining consumer loans. It might also be able to sell its mass market advisory business, formerly called United Capital, for more than the $US750 million it paid to acquire the firm in 2019.
Goldman would also argue that the technology it built for credit cards and checking accounts has value, so the investment, which contributed to the losses, wasn’t a complete waste. The deposits it has gathered in consumer and transaction banking have also lowered its funding costs and brought other benefits.By the end of the year, reversing course might be less painful financially.
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