Solomon says Goldman took on an excessive amount of within the client enterprise too shortly
Goldman Sachs CEO David Solomon told CNBC on Wednesday that his company suffered a disturbing quarter due in part to its overly ambitious consumer efforts.
“We obviously had a disappointing quarter and we tried to admit that up front,” Solomon said Wednesday on CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland.
The New York-based investment bank posted its biggest profit loss in a decade on Tuesday as revenue fell and spending and loan loss provisions came in higher than expected.
Goldman said quarterly earnings fell 66% year over year to $1.33 billion, or $3.32 per share, about 39% below the consensus estimate. This was the biggest EPS miss since October 2011, according to Refinitiv data.
“With consumer platforms, we got some things right. For some others we didn’t do them,” Solomon said. “We probably took on more than we should have done, you know, too much, too fast.”
The development and expansion of the private customer business turned out to be more difficult than expected. Goldman has veered from its previous strategy over the past year to build a full-fledged digital bank called Marcus. Meanwhile, Apple Card account gains in 2019 have proven less profitable than Goldman executives expected.
“I think we have a very good deposit business now,” Solomon said. “We’re working on our card platform and I think the partnership with Apple will pay off for the company.”
Aside from its consumer platforms, Solomon said Goldman’s performance in wealth management and lending was solid compared to its peers.
“Our relative asset growth and core business performance is actually quite good compared to peers,” Solomon said. “So we’re raising a lot of money to serve clients — and growing — that there’s a lot of opportunity for us in the wealth management business.”
The bank reported an 11% return on average tangible shareholders’ equity for 2022. The key profitability metric is well below the 15% to 17% returns of Goldman’s mid-term targets.