In a strategic move to refocus on its core strengths, investment powerhouse Goldman Sachs (GS) announced on Wednesday its agreement to divest lender GreenSky to a consortium led by Sixth Street Partners, an investment firm. The transaction, anticipated to be finalized next year, is projected to incur a 19-cent-per-share impact on third-quarter earnings, as revealed by sources within the Wall Street titan ahead of its upcoming results release scheduled for next Tuesday.
While precise financial details of the acquisition were not disclosed, the decision to part with GreenSky underscores CEO David Solomon’s resolve to recalibrate the strategic direction of Goldman Sachs. Solomon, who faces mounting pressure to enhance Goldman’s financial performance, recently reported the lowest quarterly profits in three years. The move aligns with his broader initiative to realign the firm’s focus by relinquishing certain mass-market ventures, prioritizing its traditional strengths in wealth management, trading, and investment banking.
In a statement, Solomon remarked, “This transaction demonstrates our continued progress in narrowing the focus of our consumer business.” The sale of GreenSky follows his September announcement to seek a buyer for a personal finance unit catering to the mass affluent. Goldman’s acquisition of GreenSky in 2022 for $1.73 billion provided the firm with a fintech platform tailored for home-improvement lending. However, the decision was made to withdraw from the consumer banking sector and pursue a suitable buyer for the enterprise.
The purchasing consortium, spearheaded by Sixth Street, traces its origins to 2009, when it was established by a cadre of former Goldman Sachs executives. It also comprises funds and accounts managed by industry heavyweights KKR, Bayview Asset Management, and CardWorks. PIMCO, a prominent global investment management firm, has also thrown its weight behind the endeavor by acquiring various GreenSky assets and offering financial support.
As of 3:30 p.m. New York time on Wednesday, Goldman’s stock experienced a nearly 1% dip. Year to date, the stock has seen a 9% decline. Since Solomon assumed the role of CEO in October 2018, the stock has appreciated by 39%. The decision to step back from consumer banking is emblematic of Goldman Sachs’ concerted effort to realign its focus on core competencies, ultimately aiming to bolster its quarterly profits.
Source: Yahoo Finance