Goldman Sachs execs ask for patience on digital brand Marcus

Executives at Goldman Sachs urged investors to be patient with its foray into consumer banking while discussing the investment bank’s third-quarter results on Tuesday.

To date, Goldman’s digital brand Marcus has generated $55 billion in low-cost retail deposits and $5 billion in loans, executives said. However, it has also lost roughly $1.3 billion since its launched in 2016, and analysts were eager to know when Goldman could expect to break even on it.

Chairman and CEO David Solomon stressed that initiatives like Marcus and a new cobranded credit card with Apple were medium- and long-term investments, and he promised more strategic details next year. He also addressed concerns about Marcus when he answered an analyst’s question about whether competitors were underestimating Goldman’s consumer push.

“This firm over time has a good track record of building businesses that are successfully integrated into the firm and really succeed all the time,” Solomon said, pointing to other business lines, including asset management and its investing platform. “We're focused on proving ourselves over time. We're focused on our clients and we're less focused on competitive views on these issues.”

Goldman Sachs operates a consumer deposit business and an unsecured installment loan under its digital brand Marcus. Goldman also launched a co-branded credit card with Apple in August. After JPMorgan Chase said in June that it would wind down its own digital bank Finn, Goldman Sachs executives said they intend to avoid that same fate for Marcus.

Overall, Goldman’s third quarter net earnings slid 26% to $1.88 billion from a year earlier. Earnings per share of $4.79 missed the mean estimate of analysts polled by FactSet Research Systems by 2 cents.

Net revenues in its investment banking business fell 15% to $1.69 billion in the third quarter. Net revenues in its investing and lending unit fell 17% to $1.68 billion. Another factor in Goldman’s earnings miss was a $267 million net loss in public equity investments in companies like Uber, Avantor Inc. and Tradeweb Markets.

Goldman’s stock price didn’t suffer for the news, though: At midday Tuesday, it had ticked up 2.4% to $206.60.

Its provision for credit losses also rose 67% on a yearly basis to $291 million. Chief Financial Officer Stephen Scherr said that the increase was a result of “idiosyncratic corporate impairments.”

He added that loan-loss provisions for Marcus remained flat on a quarterly basis and said that that unsecured portfolio was “now performing much more in line” with Goldman’s initial expectations.