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View of General Motors in downtown Detroit
Chris Kelleher/Dreamstime
Goldman Sachs
is diving deeper into consumer banking.
The bank is close to buying
General Motors
(ticker: GM) credit card business for roughly $2.5 billion, The Wall Street Journal reported Thursday. The expected deal comes one year after Goldman Sachs (GS) launched its first credit card with
Apple
(AAPL) and marks the bank’s continued efforts to diversify its offerings away from its storied investment banking history.
Back in January, at its first-ever investor day, Goldman Sachs discussed its plans to offer more consumer banking services. In April, it announced a deal with
JetBlue Airways
(JBLU) that would allow travelers to make installment payments for their trips on the bank’s MarcusPay platform.
Goldman’s deeper push into consumer lending comes at an interesting time. Other banks have set aside billions in reserves to protect against potential loan losses due to the economic downturn caused by the coronavirus pandemic. But Goldman Sachs, with its smaller loan book, hasn’t had to build out reserves as other banks have. And while bank stocks are down by roughly 35% this year, Goldman Sachs has fared reasonably well with shares off by 13.7% as the bank’s performance has been helped by robust trading and underwriting activity.
While trading has been a boon this year, trading had been a volatile business for the big banks in the years since the last financial crisis, which is why Goldman is expanding its consumer and wealth management businesses.
“Goldman Sachs management has a desire to grow the credit card business and small bolt-on credit card deals are in-line with that growth strategy.” Brian Kleinhanzl, managing director at Keefe, Bruyette & Woods, wrote Thursday. He estimates that if the card portfolio has an 8% yield, then it would improve his 2021 earnings forecast by less than 1%.
Goldman Sachs shares were down 1.2% in Thursday’s trading, and little changed in after-hours.
Write to Carleton English at [email protected]
