Goldman Sachs’ consumer and wealth management businesses proved to be a source of strength in a quarter in which the company’s overall revenue fell amid economic and geopolitical volatility.
Net revenue for the segment hit a record high of $2.2 billion through June, up 25% year-over-year. Within the business as a whole, personal banking was the star, with net revenue of $608 million, up 67% from the prior year quarter on the back of deposit balances and higher credit cards.
But it was not the only star. Compared to the second quarter of 2021, incentive fees increased 60% to $24 million, while private banking and lending revenue increased 23% to $230 million.
The New York-based investment firm with $1.6 trillion in assets has set out a fairly aggressive growth plan for the segment, aiming to generate over $4 billion in revenue by 2024.
“You can obviously see this quarter that we’re making progress on the revenue side of the business,” Goldman Sachs CEO David Solomon told analysts on the company’s earnings call on Monday.
Goldman Sachs, which remains primarily an investment bank, was the construction of Marcus, its consumer digital bank, since 2016 when it launched an online savings account and installment loan. It has since added other products and services, including a digital wealth management platform called Marcus Invest, the Virtual Apple Card, and more recently, home improvement loans.
Earlier this year, the company reached a OK with General Motors to issue the My GM Rewards card, which replaces another GM card previously operated by Capital One. And later this year, it plans to roll out a free digital checking account, which is currently in testing mode with Goldman employees based in the United States. The account will include a physical debit card.
Asked by an analyst how the company views the business against a potential recession and competition from fintechs, Solomon said the company remains clear on its intention to “create a premier digital platform plan in the consumer banking sector” over time.
Another analyst wanted to know if there were any other acquisitions or partnerships in the works.
The focus is on ongoing business, including the new checking account, Solomon said.
But “certainly as we move into 2023 and 2024 we will be more open to other partnerships and other meaningful things in the future,” he added.
Strong consumer and wealth management performance this quarter contrasts with a decline in Goldman Sachs’ net income, which fell 23% year-over-year to $11.9 million. dollars. Net income, meanwhile, fell 48% to $2.9 billion, while earnings per share fell 49% to $7.73 for the period.
However, these figures exceed analysts’ forecasts. Earnings per share, for example, were expected to be $6.56 according to the average estimate of analysts polled by FactSet Research Systems.
The company blamed the drop in numbers on lower investment banking and asset management net income, which was dragged down by uncertainty created by Russia’s war on Ukraine. and the potential for economic headwinds in the United States and elsewhere. Investment banking revenue fell 41% year-over-year to $2.1 billion, while asset management revenue fell 79% to $1.1 billion. dollars for the same three-month period.