Goldman Sachs Group hints at cost cuts to reach targets

NEW YORK: Goldman Sachs Group posted a blockbuster fourth-quarter profit that dwarfed Wall Street estimates, but executives warned that capital markets activity fueling results lately will probably slow down and that the bank’s consumer business will take longer to get in the black.

Analysts pressed Chief Executive David Solomon and Chief Financial Officer Stephen Scherr about whether Goldman can hit profit targets they established if trading revenue declines meaningfully and if growth in Goldman’s retail business, Marcus, is much slower than expected.

They maintained firm-wide targets for efficiency and return-on-equity, suggesting that Goldman may lean on cost cuts instead of revenue growth to reach them.

“We’ve got levers to pull on expense,” Scherr said. Management also backed away from an earlier goal to turn Marcus profitable in 2021.

Goldman hit the brakes on expanding consumer loans due to the coronavirus pandemic, while also investing more heavily in Marcus’s infrastructure. The business is on track to reach a deposit-growth goal, but it will take at least another year to turn a profit, Solomon said. Goldman shares fell 1.6% to $296.27.

Solomon made Marcus a cornerstone of his broader strategy to make Goldman look more like a full-service lender catering to individuals and global corporations alike. But his strategy has faced questions from the start — about whether Goldman was out of its depth with consumer lending, whether it could compete against the likes of Jpmorgan Chase & Co or Citigroup when providing services to companies or whether it could deliver aggressive growth targets without a major acquisition.