Goldman Sachs says new fintech unit has incurred $3 billion in losses since 2020

Goldman Sachs’ newly created “Platform Solutions” technology and consumer unit would have posted a pretax loss of $3 billion since 2020, the bank said on Friday as it restated the past three years of its financial results.

Goldman is restating earnings to reflect a new divisional structure, which was unveiled in October by Chief Executive David Solomon in an effort to persuade investors to give the bank a higher valuation. The release is designed to help investors track the divisions’ performance and comes ahead of the bank’s fourth-quarter results next Tuesday.

It offers the most detailed information to date on the losses at a large part of Goldman’s consumer banking efforts. Goldman had publicly stated that the consumer business was loss-making, but had previously only shared top-line revenue figures for the unit, rather than profit or loss figures.

Platform Solutions reported a loss for the first nine months of 2022 of $1.2 billion, $1.05 billion for the full year in 2021 and $783 million in 2020.

The division includes the technology Goldman uses to support credit cards for companies such as Apple and General Motors and online lending business GreenSky, which it bought last year, as well as transaction banking services for corporate clients.

The other part of Goldman’s consumer business, digital bank Marcus, will be folded into its private wealth management unit and will be downsized.

In addition to the changes in the consumer business, the reorganization also merged Goldman’s crown jewel investment banking and trading operations into one division and reunited the bank’s asset and wealth management businesses.

The figures published on Friday also underline how the combined investment banking and trading business is Goldman’s profit engine, reporting pre-tax profit for the first nine months of the year of $11.9 billion, the vast majority of its $12 billion profit.

Asset and wealth management reported more modest pre-tax profits of $1.2 billion, but in the longer term Goldman management hopes that this business will help generate more stable earnings for the bank and boost the stock market.

The restatement of results comes at the end of a grueling week for Goldman, in which the Wall Street bank cut thousands of jobs as part of the biggest cost-cutting exercise since the 2008 financial crisis.

For the fourth quarter, analysts forecast earnings per share to fall nearly 50 percent year-over-year due to falling revenues in investment banking and asset management, according to consensus data compiled by Bloomberg.

Goldman said the restatement had had no effect on its historical total net income, provision for credit losses, operating expenses and profit before tax.