Goldman Sachs (NYSE:GS) is reportedly planning to sell its GM-branded credit card program, marking a significant strategic shift away from consumer lending. This decision underscores the bank's focus on cost reduction and a strategic refocusing towards more profitable ventures. The initiative was communicated to the employees of the Platform Solutions division at Goldman Sachs, which has been tasked with initiating the search for a successor to manage the GM credit card program.
Goldman Sachs had outbid Barclays (LON:BARC) in 2020 to acquire this program for $2.5 billion, envisioning transforming cars into mobile eCommerce hubs. However, this vision has been hindered by a perceived lack of effort from car dealers to promote the card, causing frustration among Goldman employees. Despite this setback, Goldman Sachs introduced the "My GM Rewards" card in 2022, allowing users to accumulate points for new GM vehicles or dealership services.
The bank's venture into consumer banking has not fully materialized as expected, leading to a broader strategic shift. As part of this change, Goldman Sachs has initiated discussions with American Express (NYSE:AXP) about selling both the Apple (NASDAQ:AAPL) and GM cards. This move aligns with their strategy to focus more on core franchises like global banking & markets and asset/wealth management operations.
In line with this strategy, Goldman Sachs sold its GreenSky consumer finance platform and associated loans to a group led by Sixth Street last month for strategic alternatives. The sale of GreenSky, a home renovation loan platform purchased for $1.73 billion but sold at a loss, and the divestiture of the majority of its personal loan portfolio earlier this year, demonstrate the bank's commitment to retreat from consumer lending operations.
Despite these strategic shifts, Goldman Sachs will continue managing both the GM and Apple card programs during the transition period. General Motors (NYSE:GM) will participate in the sales process to ensure a smooth transition. For employees potentially affected by layoffs due to these changes, Goldman Sachs has pledged severance pay equivalent to one year's salary, demonstrating the company's commitment to its workforce during this period of strategic realignment.
While this decision marks a significant departure from consumer lending for Goldman Sachs, CEO David Solomon predicts an IPO market recovery by 2024, suggesting a potential shift in the bank's strategic focus.
InvestingPro Insights
In light of Goldman Sachs' strategic shift, InvestingPro provides valuable insights to better understand the bank's financial standing. With a substantial market cap of $111.29B and a P/E ratio of 15.59, Goldman Sachs remains a prominent player in the Capital Markets industry.
InvestingPro Tips highlight that the management has been aggressively buying back shares, reflecting confidence in the bank's financial health. Additionally, the company has a strong track record of raising its dividend for 12 consecutive years, demonstrating its commitment to returning value to shareholders. On the other hand, the company's earnings per share have been on a declining trend and net income is expected to drop this year, indicating potential challenges ahead.
In terms of liquidity, Goldman Sachs is in a strong position with liquid assets exceeding its short-term obligations, which may provide some security amidst its strategic changes.
Investors should note that Goldman Sachs has over 20 additional insights and tips available on InvestingPro, offering a more comprehensive understanding of the company's financial standing and strategic direction.
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