Goldman Sachs Faces Fed Scrutiny of Money-Losing Marcus Consumer Unit

Investment bankers and traders bracing for job cuts or lower bonuses are competing with a division that was once supposed to break even in 2022, but has instead eaten up more than $4 billion since inception in 2016.

That’s not including Goldman’s acquisition of installment-loans provider GreenSky Inc. in a deal initially valued at more than $2.2 billion last year at what turned out to be the peak of the market for fintech ventures.

With business lines such as investment banking, capital markets and asset management cooling off, analysts predict the firm will post a more-than 40% drop in net income this year. That has Goldman tightening its belt.

The bank’s leaders set aside 31% less for compensation in the first half. And in recent weeks, they have been getting ready to resume an annual culling cycle that was paused during the pandemic, sketching out plans to eliminate several hundred roles.

Waldron’s efforts to put Marcus back on track are being welcomed outside the bank. Credit Suisse Group AG analyst Susan Katzke wrote in a note last month that she was assured by Goldman management that, even as the firm remains committed to such growth initiatives, it’s shifting the emphasis toward wealth management and less on retail banking.

The Waldron-led team promised a narrower focus on consumer banking after acknowledging the firm “tried to do too much at once,” according to the report.

Some key executives who helped get the consumer business off the ground are no longer at the company. They include former Chief Financial Officer Stephen Scherr, Harit Talwar, a consumer-banking veteran who was brought on for his retail know-how, and Omer Ismail, who left to run a new banking venture backed by Walmart Inc.

Other authorities have also shown interest in Marcus. Goldman last month disclosed a probe by the Consumer Financial Protection Bureau into the company’s credit-card practices, including how the lender resolves incorrect bills and processes refunds.

Such investigations have typically resulted in modest fines and operational tweaks that don’t imperil the business.

But for Goldman, it’s an unwelcome intrusion into a marquee partnership with Apple Inc., a major client that trumpeted its partnership with the lender when the two firms expanded into credit cards in 2019.

(Photo: Bloomberg)