Goldman Sachs has reportedly accelerated the sale of its online lending business, GreenSky, for approximately $500 million to a consortium of investment firms comprising Apollo Global Management, Sixth Street, Pacific Investment Management (Pimco), KKR, and two other smaller investors. This action represents a crucial milestone in Goldman's efforts to withdraw from the consumer banking industry and is in conformity with its revised strategic objectives.
Founded in 2006, GreenSky offers paperless mobile app loans designed as an alternative to credit card loans and specialises in home improvement loans and personal medical loans. The Atlanta-based FinTech platform has partnered with over 14 banks, providing $12 billion in financed loans to roughly 1.7 million customers. The acquisition of GreenSky by Goldman Sachs in 2021 was viewed as a bold move, indicating the bank's interest in the consumer banking sector. However, the regulatory scrutiny of Goldman Sachs’ consumer banking products surfaced as a leading factor in the shift in the bank's strategy, pushing the sale of GreenSky.
In October 2022, Goldman Sachs announced a significant restructuring strategy, moving away from its traditional Wall Street model. By consolidating trade and investment banking into one unit, asset and wealth management into another, and elevating its digital products into a third section, the bank created a three-pronged organisation. Goldman's decision to sell GreenSky can be attributed to several factors. Firstly, the shift in investor sentiment towards the consumer banking sector, coupled with years of losses, has led the bank to reconsider its commitment to this area. Secondly, alternative asset managers like Apollo Global Management, Sixth Street, and KKR have aggressively expanded their credit and insurance-related investment operations, making it increasingly competitive for traditional banks to maintain their foothold in these markets.
The bank has since been cutting ties with various elements of its costly consumer banking business, selling around $1 billion of its $4.5 billion loan portfolio in the first quarter of this year at a reported loss of $470 million. This was followed by the additional sale of $1 billion worth of personal loans to Varde Partners, an alternative investment firm, in July of this year. Most recently, Goldman Sachs sold its personal wealth management venture to Creative Planning, a Kansas-headquartered wealth management firm, for an undisclosed sum, in a clear shift away from its consumer banking operations to pursue serving ultra-high-net-worth individuals.
Goldman Sachs’ shares have gained 7.8% over the past six months, compared with the industry’s 3.6% increase. The sale presents an opportunity for Goldman Sachs to optimise its investment, given the significant disparity between the initial $2.24 billion acquisition and the current $500 million asking price. At present, information regarding the financial advisors engaged in this transaction remains undisclosed. However, Goldman Sachs’ decision to pursue these investment firms as prospective buyers implies a deliberate strategy to ensure a profitable exit from its investment in GreenSky. As per reports, Goldman Sachs intends to wrap up the deal before its third-quarter earnings report due in October 2023.
Written By: Mohammed Mukadam
Sources: Bloomberg, Financial Times, Reuters, Wall Street Journal, Banking Dive
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