Goldman Sachs eats $470M loss on disastrous Marcus consumer bank

Goldman Sachs revealed a painful drop in quarterly profits Tuesday, slammed by a dealmaking slump and a major loss tied to the money-losing consumer bank Marcus.

The Wall Street giant disclosed a $470 million loss “related to a partial sale of the Marcus loans portfolio” as Goldman pursues an overhaul of its unprofitable online banking initiative. Goldman said it has transferred the rest of its Marcus loan portfolio to held for sale from held to maturity.

Goldman reported net earnings of $3.23 billion, or $8.79 per share in the first quarter. That figure marked an 18% decline compared to the same quarter one year ago – though it topped Wall Street’s expectation for earnings of $8.14 per share, according to FactSet data.

The firm’s quarterly revenue was $12.22 billion – down by 5% compared to one year ago and far short of the $12.76 billion projected by Wall Street analysts.

Goldman Sachs and other banks, both large and small, faced major headwinds in the first quarter as the sudden collapse of Silicon Valley Bank and Signature Bank of New York triggered upheaval in the sector.

“The events of the first quarter acted as another real-life stress test, demonstrating the resilience of Goldman Sachs and the nation’s largest financial institutions,” Goldman Sachs CEO David Solomon said in a statement.

“Our deeply rooted risk management culture, strong liquidity and robust capital position enabled us to continue to support our clients and deliver solid performance,” he added.

In February, Solomon said Goldman was exploring “strategic alternatives” for Marcus, which has lost more than $3 billion since its debut in 2020. The bank is attempting to stabilize its business amidst an internal shift that included thousands of layoffs.

Shares of Goldman Sachs were down nearly 3.5% in premarket trading on Tuesday.

Goldman said its $470 million loss on the partial sale of Marcus loans was “largely offset” by a $440 million reserve release. The $440 million release contributed to Goldman’s earnings beat by contributing $1.20 to earnings per share, according to a Wells Fargo note obtained by CNBC.

Goldman also took a $355 million hit related to its real estate investments.

Fixed-income trading revenue fell 17% to $3.93 billion in the first quarter. Goldman attributed the shortfall to “significantly lower new revenues in currencies and commodities.”

Investment banking revenue sank 26% to $1.58 billion as Goldman and other firms weather on ongoing industrywide slowdown in mergers & acquisitions activity.

Goldman is the only major Wall Street bank to post a decline in fixed-income trading revenue so far this earnings season, according to Bloomberg.