Goldman Sachs (NYSE:GS) and Barclays have reached an agreement regarding Goldman Sachs’ $2 billion portfolio of loans linked to General Motors customers. The portfolio will be sold to Barclays at a discount from the outstanding balances’ value. This deal indicates Goldman Sachs’ further shift away from retail banking following notable losses and regulatory issues. Goldman Sachs plans to continue divesting from similar ventures, while Barclays aims to expand its assets in this sector.
Goldman Sachs has been steadily exiting its retail banking ventures. The firm previously sold GreenSky and Marcus loans and agreed to transfer its Marcus Invest digital accounts to Betterment. The GM credit card portfolio has faced high charge-off rates, prompting the bank to seek buyers since spring. Barclays and Goldman Sachs had been negotiating this transaction, and Barclays’ willingness to accept a lower price facilitated the final agreement.
Goldman Sachs Faces Financial Impact
Goldman Sachs CEO David Solomon recently noted significant progress in transitioning the GM card platform. The bank anticipates a $400 million loss related to this and other small retail ventures. This sale marks another step in Goldman Sachs’ retreat from Main Street banking. Solomon remarked,
“We have made significant progress on the transition of the GM card platform.”
Barclays Expands Its Asset Base
Barclays has been actively looking to increase its assets by $10 billion in the coming years. The acquisition of Goldman Sachs’ GM credit card business aligns with this strategy. The high charge-off rates associated with the GM credit card program, exceeding 10%, contrast sharply with the 4.5% average rate of American commercial banks. This acquisition could pose challenges for Barclays but also presents an opportunity for growth in the credit card sector.
Goldman Sachs is also pursuing the sale of its Apple (NASDAQ:AAPL) credit card portfolio, further emphasizing its strategic pivot. The bank’s withdrawal from consumer banking aligns with its focus on investment and market-oriented activities. This shift reflects broader efforts to streamline operations and concentrate on areas with higher returns and fewer regulatory constraints.
The agreement between Goldman Sachs and Barclays underscores a significant shift in the banking landscape. Goldman Sachs’ retreat from consumer banking signals a strategic reorientation, while Barclays’ acquisition efforts highlight its ambition to grow in the credit card market. For stakeholders, understanding these moves offers insight into broader trends in the banking industry and potential future developments.
