“I know that Everyone wants answers to that,” said David Solomon, CEO of Goldman Sachs, as he was visibly upset by another question about how quickly the bank could break even in its platform solutions business, home of its consumer credit division, which lost $1.7 billion in 2022. “But I can’t answer that question. The investor then tried flattery: “Goldman Sachs is world class at risk management…if you make a bad trade, get out,” he said, before asking what else the bank could do to reduce losses on platform solutions. “Thanks for the compliment,” Mr. Solomon replied before turning and walking away to move on to the next question. The auditorium, filled with shareholders, analysts and media attending the company’s February 28 investor day at headquarters, stiffened.
The tense exchange reflects frustrations within Goldman. Mr. Solomon can point to metrics that show he’s served investors well enough. Since its acquisition in 2018, the company has delivered an annualized total return to shareholders of 13% — better than the broader market and almost all of its peers, with the exception of Morgan Stanley, its main rival, which managed to return 21% over the period.
Mr. Solomon argues that this is because the company delivered on many of the promises it made about its core business at its first investor day three years ago, such as: B. the growing market share has fulfilled Investment Banking, and strengthening assets under management. From this perspective, the analyst and media obsession with mounting losses on platform solutions that remain a tiny part of the company is undeserved.
But the skirmish was also a sign of investor frustration. While Goldman’s core business has performed well, it’s been such a strange time for the capital markets that it’s hard to say how much of the success can be repeated. The company is struggling to use its own balance sheet to drive down the value of the investments it makes, resulting in wild swings in earnings. Platform solutions may be a small part of the business, but the costs add up. Losses doubled from 2021 to 2022, which hurt its return on equity by two percentage points over the past year.
On its investor day, Goldman tried to reassure shareholders. These included mea culpas from Mr Solomon, who said Goldman had been doing “too much too quickly” and had grown into areas where it had “no competitive advantage”. The company also made promises: Stephanie Cohen, head of platform solutions, said the scale would help the company turn a profit by 2025. Mr Solomon teased a sale, saying Goldman was exploring “strategic alternatives”. Bloomberg later reported that Goldman could sell GreenSky, a home improvement lender Mr Solomon acquired just a year ago. Those mixed messages — promising to expand the business and divest parts of it — seem to have confused investors. The share price plummeted. On a day when the S&P 500 index of large American companies fell only 0.3%, shares of Goldman fell almost 4%.
As Mr. Solomon answered investor inquiries, a screen behind Mr. Solomon displayed the company’s slogan for the day, the syntactically awkward “Focused on the Forward.” The message investors sent back: not yet. ■
