Goldman's pivot away from money-losing Marcus shows that disrupting retail banking is hard
Goldman Sachs CEO David Solomon is reining in his ambition to make the 153-year-old investment bank a major player in U.S. consumer banking.
After product delays, executive turnover, branding confusion, regulatory missteps and deepening financial losses, Solomon on Tuesday said the firm was pivoting away from its previous strategy of building a full-scale digital bank.
Now, rather than "seeking to acquire customers on a mass scale" for the business, Goldman will instead focus on the Marcus customers it already has, while aiming to market fintech products through the bank's workplace and wealth management channels, Solomon said.
The moment is a humbling one for Solomon, who seized on the possibilities within the nascent consumer business after becoming CEO four years ago.
Goldman started Marcus in 2016, named after one of the bank's cofounders, to help it diversify revenue away from the bank's core trading and advisory operations. Big retail banks including JPMorgan Chase and Bank of America enjoy higher valuations than Wall Street-centric Goldman.
Scrutiny from analysts
After Wells Fargo's Mike Mayo asked whether the consumer business was making money and how it stacked up against management expectations, Solomon conceded that the unit "doesn't make money at the moment." That is despite saying in 2020 that it would reach breakeven by 2022.
Troubles with Apple
Despite the turbulence, Goldman's adventure in consumer banking has managed to collect $110 billion in deposits, extend $19 billion in loans and find more than 15 million customers.
"There's no question that the aspirations probably got, and were communicated in a way, that were broader than where we're now choosing to go," Solomon told analysts. "We are making it clear that we're pulling back on some of that now."