Goldman Sachs (NYSE:GS) reportedly divested another $1 billion in personal loans from its online banking division, Marcus, to Varde Partners. These unsecured loans were sold at a discounted value compared to their face value. Furthermore, the transaction represents the second sale by GS in 2023, as the company is actively ceasing the provision of unsecured loans through Marcus.
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In the first quarter of 2023, Goldman first sold about $1 billion of its $4.5 billion loan portfolio. The sale of these loans resulted in a loss of $470 million for the bank. However, the company was able to partially offset this loss by releasing $440 million of reserves that were previously set aside for these loans. This move helped mitigate the impact of the loss on the bank’s earnings.
The Downturn of Marcus by Goldman
Marcus by Goldman Sachs was introduced in 2016 as a strategic move to enter the realm of consumer banking. By launching Marcus, Goldman Sachs sought to diversify its business and tap into the growing demand for digital banking solutions in the retail sector.
With progress, Marcus expanded its product offerings to include savings products, checking accounts, and personal loans. Furthermore, it collaborated with prominent companies such as Apple (AAPL) and General Motors (GM) to offer co-branded credit cards.
However, the unit remained unsuccessful in generating profit despite engaging in several growth efforts. Particularly during the pandemic, the bank faced trouble when customers were unable to pay their bills.
Moreover, the Consumer Financial Protection Bureau conducted an investigation into the bank’s management of credit card accounts. Also, in September 2022, the Federal Reserve took the online banking platform under its scrutiny.
Finally, owing to mounting losses and concerns raised by shareholders regarding the sustainability of its consumer-facing banking business, Solomon announced plans to dismantle the Marcus business. Most of Marcus’ products were transferred into the Wealth Management and Asset Management businesses.
GS Upcoming Q2 Earnings
Goldman is scheduled to release its Q2 earnings on July 19, before the market opens. The Street expects GS to report earnings per share of $3.16, compared with $7.73 reported in the same period last year.
Is GS Stock a Good Buy?
Ahead of the earnings release, three analysts have maintained a Buy rating on GS stock, indicating their positive outlook and recommendation to purchase the stock. According to the analyst consensus, GS is a Strong Buy based on 11 Buy and three Hold ratings. The average Goldman stock price target is $398.21, implying 21.15% upside potential.
Investors looking for GS’s most accurate analyst could follow Credit Suisse analyst Susan Roth Katzke. Copying the analyst’s trades on this stock and holding each position for one year could result in 72% of your transactions generating a profit, with an average return of 19.1% per trade.
