Goldman Sachs is facing a significant financial blow with the potential sale of its General Motors credit card portfolio. The Wall Street Journal reported that the investment bank could lose nearly $400 million in pre-tax profits from the transaction. The sale has been in discussion for months, with Goldman Sachs aiming to offload the business to Barclays. However, Barclays has expressed hesitation in meeting Goldman’s initial price due to concerns over high charge-off rates. These rates represent the portion of outstanding balances that are unlikely to be repaid by borrowers, indicating a potential risk for Barclays.
This news comes at a time when Goldman Sachs is already facing pressure from a challenging financial environment. The bank’s CEO, David Solomon, recently warned of a decline in trading revenue for the third quarter and significantly lower revenues in the asset and wealth management sectors. The bank’s consumer lending ventures, including its credit cards, have contributed over $6 billion in pretax losses since early 2020. In response, Goldman Sachs has been shifting away from consumer finance and focusing on its core strengths in investment banking and high-net-worth clientele.
The potential loss from the credit card sale adds to the ongoing challenges faced by Goldman Sachs and highlights the broader difficulties within the banking industry. JPMorgan Chase & Co. also experienced a 7.5% drop in its share price on Tuesday after COO Daniel Pinto tempered analyst forecasts on next year’s expenses and net interest income. This underscores the uncertainties and headwinds that banks are navigating in the current economic climate.
