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Goldman Sachs (NYSE:GS) is facing a potential pre-tax hit of nearly $400 million from the sale of its General Motors (NYSE:GM) credit card portfolio and a smaller, unrelated business.
What Happened: Goldman has been in discussions for several months with GM and Barclays PLC (NYSE:BCS) about transferring the credit card business to the British bank. However, Barclays has been hesitant to meet Goldman's initial price due to high charge-off rates, which indicate the portion of balances that are unlikely to be repaid by borrowers, The Wall Street Journal reported on Tuesday, citing people familiar with the matter.
Goldman's shares fell over 4% on Tuesday following the news. CEO David Solomon noted during a banking conference on Monday that trading revenue for the third quarter is projected to decline by nearly 10% compared to the previous year, and he warned of “significantly more muted” revenues in the asset and wealth management sectors.
The bank’s consumer-lending ventures, including its credit cards, have resulted in over $6 billion in pretax losses since early 2020. Goldman began shifting away from consumer finance in 2022, refocusing on its core strengths in investment banking and catering to high-net-worth clients.
Goldman Sachs did not immediately respond to Benzinga's request for comment.
Why It Matters: This latest development comes on the heels of several significant financial events. On Tuesday, JPMorgan Chase & Co. (NYSE:JPM) saw its shares drop by 7.5% after COO Daniel Pinto tempered analyst forecasts on next year's expenses and net interest income (NII) at an industry event.
Pinto indicated that the current NII consensus of $89.5 billion was “not very reasonable” given the interest-rate forecasts.
In July, Goldman Sachs reported better-than-expected earnings for the second quarter. The bank posted revenue of $12.730 billion, surpassing the consensus of $12.456 billion. The U.S. financial services giant also reported GAAP EPS of $8.62, beating the consensus of $8.35.
Price Action: Goldman Sachs’ shares closed 4.39% lower on Tuesday at $467.13. In premarket trading on Wednesday, the stock was marginally down by 0.028%, according to Benzinga Pro data.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
