Goldman Sachs still enjoys a reputation as one of the world's most commercially astute investment banks. However not even the golden child of the banking sector was immune to the savage downturn in the market during 2008, which crippled Goldman's stock price and forced it to abandon its legal status as a securities house in order to maintain the confidence of its own shareholders. Previously, unlike most of its peers, the company had resisted the temptation to diversify into a broader selection of financial services during the 1990s and early 2000s. Instead it focused even more tightly on what it does best, moving more quickly than any of its peers to take advantage of new trends within the industry, with great skill and extraordinarily lucrative results. Until 2008, that is, when the firm reported its first ever quarterly losses. By early 2009, Goldman was once again firing on all cylinders, allowing it to report another set of record results for the year. Since then, though, performance has been somewhat less inspiring as the firm took action to shift its focus away from the riskier activities in which it had previously excelled. As a result, Goldman eventually took the leap into consumer banking for the first time. The purchase of one of General Electric's old financial services units led to the launch of a retail savings offer - Marcus by Goldman Sachs - and then with the launch of Apple Card, its first credit card offering, in partnership with Apple. Yet those consumer-facing operations are still dwarfed by its main business in investment banking services, securities trading and asset management. It is the undisputed leader in global mergers and acquisitions, having held that position consistently since 1998, and is among the top two in equity and IPO underwriting. David Solomon succeeded Lloyd Blankfein as CEO in 2018. With only limited exposure to consumer banking, Goldman was well-placed to report a surge in performance in 2020, as companies rushed to raise funds and stock markets enjoyed strong rises during the Covid pandemic. Net revenues rose to $44.5bn; the best result since 2009 and not far behind the record $46bn reported in 2007. Net income was $9.5bn, almost half of that sum in just the final quarter. Total assets were almost $1.2 trillion. The Global Markets division generated almost half of revenues, split equally between equities trading and fixed income trading. Asset Management generated a further 18%, Investment Banking 21% and Consumer & Wealth Management the remaining 13%. The latter includes new consumer-oriented services such as Marcus and Apple Card, which contributed annual revenues of over $1.2bn.
Capsule checked 28th February 2020
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Adbrands Daily Update 16th Sep 2021: In a new push into traditional consumer finance, Goldman Sachs has agreed to acquire "buy now pay later" lender GreenSky for $2.2bn. The company specialises in loans to businesses such as retailers, builders and even cosmetic surgeries to offer installment payment plans to their customers. "Our highly scalable, proprietary and patented technology platform enables merchants to offer frictionless promotional payment options to consumers, driving increased sales volume and accelerated cash flow," says the lender. "Banks leverage our technology to provide loans to super-prime and prime consumers nationwide." GreenSky's current loan portfolio is in excess of $6bn.
Adbrands Daily Update 2nd Oct 2020: Goldman Sachs made a second push into co-branded credit cards with the acquisition of GM's card operations for around $2.5bn. It topped a rival bid from Barclays, and will inherit the business from incumbent lender Capital One. GM joins Apple in Goldman's consumer card portfolio, adding around 1m cardholders and annual spending volumes of approx $8.5bn. Goldman is understood to be seeking further such deals to expand its operations.
Adbrands Daily Update 15th Jan 2020: Goldman Sachs' golden days are definitely in the past (for now at least). Performance for 4Q 2019 was dented by a $1bn charge for litigation. No specifics were given, but the provision is believed to be associated with the 1MDB bribery and money-laundering scandal to which Goldman was connected. However, the investment banking business also performed poorly, though declines there were offset by strong performance in fixed income and equity trading and a modest uptick in the new consumer and wealth management division. Full year revenues were $36.6bn with net income of $8.5bn.
Adbrands Daily Update 11th Nov 2019: Goldman Sachs got a quick lesson in the multiple potential minefields involved in offering consumer financial services - an area in which it is a comparative novice - as a result of a media storm over Apple Card. Goldman is Apple's financial partner for this newly launched service, and it is the bank's first ever consumer credit offering. In a series of tweets over the weekend, tech entrepreneur David Heinemeier Hanson complained that Apple Card had offered him a credit limit 20 times higher than the one proposed for his wife, despite the fact that she has a higher credit score than he does. He accused the company of anti-female bias. This prompted a response from, of all people, Apple's co-founder Steve Wozniak. "The same thing happened to us," he tweeted. "I got 10x the credit limit" despite the fact that he and his wife have no separate bank or credit card accounts or any separate assets. "Hard to get to a human for a correction though," added Wozniak. "It's big tech in 2019." The bank denied any such bias. However, the New York Department of Financial Services has promised to investigate: "Any algorithm, that intentionally or not results in discriminatory treatment of women or any other protected class of people violates New York law."
Adbrands Daily Update 25th Feb 2019: Apple will team up with Goldman Sachs to launch a new credit card and consumer finance service, uniting two of the most prestigious names in US tech and banking. It represents a significant ramp-up in Goldman's tentative moves into traditional retail banking, initiated with the launch of consumer bank Marcus in 2016. This will be its first credit card offering. It is expected to launch for Apple employees within the next month or two, using the Mastercard network, and then will roll out to new sign-ups later this year if all goes smoothly. Currently Apple earns only a small commission when iPhone users make purchases through Apple Pay using third-party cards. It would get a much bigger cut from its own card.
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