In a bold move that left Wall Street buzzing, Goldman Sachs announced on Wednesday that it had struck a deal to sell its fintech lending platform, GreenSky, to a consortium of investors led by private equity firm Sixth Street. Want to know the kicker? This agreement will trigger a 19 cents per share cut in Goldman’s third-quarter earnings. But don’t worry – the banking behemoth is set to reveal its results this coming Tuesday.
This is just the latest twist in the saga of CEO David Solomon’s retreat from retail banking – a venture that hasn’t exactly been a bed of roses. You see, under his stewardship, Goldman Sachs acquired GreenSky last year for a cool $1.7 billion, brushing aside the concerns of deputies who thought the home improvement lender wasn’t quite their cup of tea.
Fast forward a few months and Solomon was already inviting bids for the business, part of his wider pivot away from consumer finance. And GreenSky isn’t the only thing he’s been offloading. Goldman also parted ways with a wealth management business and rumor has it they’re in discussions to unload their Apple Card operations too.
Solomon said in an official release, “this transaction demonstrates our continued progress in narrowing the focus of our consumer business”. It seems like Goldman Sachs is keen to return to what it does best: investment banking and trading. And let’s not forget their drive to boost asset and wealth management fees.
Despite its imminent departure from the Goldman portfolio, GreenSky won’t be packing up shop just yet. The bank confirmed it will continue operating the platform until the sale officially closes in Q1 2024.
The upcoming dip in third-quarter earnings isn’t just due to selling off GreenSky – there are other factors at play here too. We’re talking about costs related to writing down GreenSky intangibles, loan portfolio marks, and a rise in taxes all playing their part. But on the flip side, Goldman will be releasing loan reserves tied to the transaction. Let’s not forget that just this July, Goldman disclosed a whopping $504 million second-quarter impairment on GreenSky.
The Sixth Street group stepping into Goldman’s shoes includes funds managed by KKR, Bayview Asset Management, and CardWorks. We’ve seen private equity groups like these play important roles in various banking industry asset divestitures since the start of the year – think about their funding of the PacWest merger with Banc of California.
All in all, it’s clear that CEO David Solomon’s dance