Solomon Says Goldman Pushed Too Quickly Into Consumer Banking

(Bloomberg) -- Goldman Sachs Group Inc (NYSE: GS ). was overly aggressive in pushing into the consumer space, doing “too much, too quickly,” which contributed to worse-than-expected fourth-quarter earnings, Chief Executive Officer David Solomon said.

“We obviously had a disappointing quarter and we tried to own that upfront,” Solomon said in a CNBC interview Wednesday at the World Economic Forum in Davos, Switzerland.

The investment-banking giant poured billions of dollars into its retail effort, which includes the Apple Card and specialty-lending platform GreenSky. That operation, which posted revenue of $513 million for the quarter, has racked up $3.8 billion in pretax losses over the past three years. Goldman on Tuesday reported a bigger increase in expenses than analysts expected as compensation costs surged 16% from a year earlier to $3.8 billion.

Despite its missteps, New York-based Goldman “did some things right” in the consumer business, Solomon said. “We now have a very good deposits business,” he said, and the partnership with Apple Inc (NASDAQ: AAPL ) is “an interesting opportunity to experiment and try different things.”

The bank’s return on equity for 2022 fell to 10.2%, below the 14%-to-16% target it set for itself earlier in the year. The firm’s shares slumped 6.4% on Tuesday, their biggest decline in a year.

Solomon also said in the interview that he’s hearing more indication that the economy may be able to dodge the recession that had been widely predicted.

“The sentiment is softening a little bit, and the view of the chance of a softer landing both in the US and Europe is actually increasing,” he said.