Goldman Considers Shrinking Its Consumer Business

“I’ve certainly reflected a lot over the course of the last three years,” he said, referencing the bank’s consumer businesses. “There were some clear successes, but there were also some clear stumbles.” 

Mr. Solomon didn’t immediately offer more details, though the language he used could suggest a sale of GreenSky or its card partnerships. Less dramatically, it could represent some kind of restructuring of the card agreements to make them more lucrative for Goldman, or allowing another bank to become an issuer alongside Goldman.  

Goldman is exploring alternatives while it works to make GreenSky and cards profitable. Should the latter occur, it is possible that Goldman wouldn’t go through with a sale or other change.

“We’re focused on profitability, the right strategy and will be nimble and flexible,” Mr. Solomon said. “We’ve significantly narrowed our ambitions for consumer strategy.” Goldman shares fell 2% in early trading, worse than other big-bank peers. 

Goldman, the epitome of a Wall Street firm for generations, has been struggling with its foray into Main Street banking. In earnings results released in January, the bank disclosed that the Platform Solutions unit had lost $3.8 billion on a pretax basis since the start of 2020.

The company said Tuesday it aims to reach a pretax break-even in Platform Solutions by 2025. 

Platform Solutions includes GreenSky and the card partnerships—together called consumer platforms. It also includes another business called transaction banking, which provides payment services to banks and corporations. That unit is currently profitable, the company said. 

His statements were a marked departure from Goldman’s last investor day in 2020. Then, the firm said it was building a leading digital consumer bank that would address a range of consumer banking and borrowing needs.

The stakes are high for Mr. Solomon. Many investors have grown frustrated because they believe Goldman hasn’t offered enough clarity about what exactly it wants to be. Some think Goldman’s efforts were too ambitious for a bank that didn’t have consumer lending in its DNA. 

“It became clear that we lacked certain competitive advantages and that we did too much too quickly,” Mr. Solomon said Tuesday. 

The potential for a slowing economy, where overall delinquencies rise and banks have to set aside more money for bad loans, also helped convince Goldman to pull back. 

Goldman President

John Waldron

said Tuesday that consumer platforms are “weighed down significantly” by reserves and operating expenses. He said Goldman is focused on making “the right strategic decisions…to ensure we understand all opportunities to unlock value.”

Goldman disclosed last year that the Consumer Financial Protection Bureau is investigating its credit-card business. The Federal Reserve is probing whether the bank had appropriate safeguards as it ramped up consumer lending, The Wall Street Journal previously reported. 

Goldman launched its consumer bank, called Marcus, in 2016. Mr. Solomon was a top executive then, though he didn’t become CEO until 2018. The bank was looking to smooth out the up-and-down returns of investment banking and trading. Customer deposits as a steady source of funding was another appeal. 

Soon, a firm used to making money work for millionaires would be running a commercial of a suburban dad singing about his high-yield savings account. Almost from the start, investment bankers and traders who were used to being the firm’s stars complained that the new consumer push would sap resources and damage Goldman’s brand. 

Goldman and Apple announced their joint credit card in 2019 to great fanfare, and the card was viewed as a way for Goldman to broaden its appeal to the masses. The partnership with General Motors followed.

But more matchups didn’t occur. Credit card lending is highly competitive, and giants such as

JPMorgan Chase

& Co. and

American Express Co.

are willing to spend heavily to get and keep customers. 

Goldman didn’t clinch the card businesses of companies including

Macy’s Inc.

and

JetBlue Airways Corp.

, the Journal previously reported. Goldman recently decided to pause its efforts to acquire any new credit-card programs, the Journal reported, including ending advanced discussions to launch a co-branded card for

T-Mobile US Inc.

Goldman closed on its roughly $1.7 billion purchase of GreenSky less than a year ago. GreenSky is a lender that specializes in making loans for home-improvement projects. Contractors and others who work on homes often pitch the loans to customers. 

The deal had some doubters inside Goldman, who were concerned about how the business would fit into the rest of the bank’s consumer operations, the Journal previously reported. Mr. Solomon wanted to show momentum in the consumer business, the Journal reported. 

Last year was among GreenSky’s best ever for loan growth, the Journal reported. Goldman began bringing those loans onto its balance sheet about six months ago, the company said Tuesday, a process that requires putting more money aside to cover possible future loan losses. It currently has more than $2 billion of these loans on its balance sheet.

Goldman has previously said it is shutting down personal loan originations. On Tuesday, the company said it is in the process of selling part of this portfolio.

Goldman’s plans for a checking account to the masses also ended recently. As recently as the summer, Goldman executives were saying the checking account would unlock new business opportunities for the bank.

Goldman appears to remain fully committed to its consumer savings accounts. That business is included in the asset and wealth management division. Mr. Solomon said Tuesday that the unit is Goldman’s “the key driver for growth as we look forward as a firm.” 

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com