Goldman’s Marcus Shows Gains In Q1

Continuing at least some of the trends seen across banks as earnings season picks up traction, Goldman Sachs posted first quarter results Monday (April 15) that showed some drag on traditional Wall Street trading and management activities, but renewed focus and strength in consumer initiatives, most notably Marcus, the online investment banking unit.

In terms of headline numbers, the company’s $5.71 in adjusted earnings per share came in significantly higher than the $4.97 that had been expected. Revenues were $8.8 billion, compared to the $9 billion expected.

At least part of that miss came as investment management revenues were lower than forecast, at $1.5 billion (off 12 percent), and where the Street had seen a bit more than $1.6 billion.

Additionally, within the investment and lending segment, revenues were $1.8 billion were shy of consensus of about $2 billion.

As reported in a statement that accompanied the earnings release, CEO David Solomon said the quarter showed a “muted start” to 2019.

Results did not drill down to a granular level that showed concrete impact from Marcus, the online banking unit,  but a rough read across from efforts to diversify business lines beyond the vagaries of Wall Street showed that net interest income in the latest quarter was $1.2 billion, which showed a surge of more than 30 percent from last year.  

The company also is targeting to grow its retail deposits platform by $10 billion a year over the next few years, as disclosed in supplemental materials released by the company in tandem with first quarter results. In terms of digital efforts the company said its partnership with Apple is one that relies on “no legacy technology” as the company brings a joint credit card product, previously announced, to market.

The goal has been to bring diversity to Goldman’s top lines and business lines, as has been disclosed by management, and where a plan has been in place for the past two years to spur $5 billion in annual additional revenue streams. The company also will seek to reduce its cost of funding by 1 percent. Amid that diversification, Goldman has had a “front to back” review of operations in place for the past several months, an ongoing effort.

The company is shifting more of its business lines into regulated bank entities. In addition, as many as 7,500 people will be shifted from engineering and operations into other business units.