Goldman hopes to double private credit business as it retreats from consumer banking

Goldman Sachs (GS) is retreating from an ill-fated foray into consumer banking. But there is another area where it plans to expand: private credit.

The Wall Street giant is attempting to double the size of that $110 billion business “over the medium term” as it makes leadership changes in the unit, according to Marc Nachmann, Goldman’s global head of asset and wealth management.

“We are putting our best talent focused on private credit,” he said.

A memo circulated by Nachmann on Monday outlined several new executive assignments. Greg Olafson, who previously served as the co-president of Goldman’s alternatives business within asset management, will become the firm’s new global head of the private credit business.

James Reynolds and Kevin Sterling, who served as the global co-heads of the private credit business, will take the roles of global head of direct lending and global head of investment grade private credit and asset finance.

“These changes will strengthen the organizational structure of our business as we look to capitalize on the significant growth of the private credit industry,” Nachmann added in the memo.

Goldman is making this push as CEO David Solomon attempts a tricky retrenchment from consumer lending while focusing the firm on its core strengths of investment banking, trading, and asset management.

David Solomon, CEO, Goldman Sachs, listens during a Senate Banking, Housing, and Urban Affairs Committee oversight hearing to examine Wall Street firms on Capitol Hill, Wednesday, Dec. 6, 2023, in Washington. (AP Photo/Alex Brandon)

David Solomon, CEO, Goldman Sachs. (Alex Brandon/AP Photo) (ASSOCIATED PRESS)

An expansion into consumer banking has cost the firm $4 billion since 2020. Over the course of 2023 it has taken several steps to exit that business.

Goldman in late August announced it found a buyer for a personal finance unit catering to the mass affluent. Then in early October, it announced the sale of specialty lender GreenSky to Sixth Street Partners and a consortium of other firms.

Credit card partnerships with General Motors (GM) and Apple may also be coming to an end.

Goldman is under pressure to improve its results. Its third quarter profits fell 33% from a year ago, the worst among big banks with sizable Wall Street operations.

It is not the only big name on Wall Street making a push into private credit, and many are not banks.

They’re Wall Street money managers ranging from private equity firms like Ares (ARES) and Apollo (APO) to other giants including BlackRock (BLK) and MetLife (MET).

Those firms have been raising funds from insurance and pension funds to buy loans or lend directly to businesses for years.

Collectively private credit funds control $1.6 trillion in assets under management, according to data provider Preqin, a figure that has doubled five times over the last two decades.

This year, the business is benefitting from the troubles of regional banks that need to pull back on lending amid higher interest rates and the prospect of tighter regulations.

Goldman is not a newcomer to private credit. It has raised funds from investors to make, buy, or service loans since before the 2000s. It raised its first mezzanine fund in 1996.

The business is housed within its asset and wealth management division. In the most recent quarter, revenues for that division brought in approximately 27% of the firm’s total net revenue of $11.8 billion but fell 20% from the year-ago period.

Goldman’s stock was up slightly Monday. It is up more than 2% since the beginning of January.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas in finance.

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