Investment banking behemoth Goldman Sachs ramped up technology investment while pulling back on retail banking operations during the fourth quarter. 

The $538 billion bank’s communication and tech spend increased 5% year over year to $503 million during Q4 while its annual tech spend increased 6% YoY to $1.9 billion, the bank said Jan. 16 in its Q4 earnings report.

The bank narrowed its focus and strengthened its core business in 2023, Chief Executive David Solomon said during the earnings call today. 

In 2023, the New York-based bank made “several important decisions and swiftly executed on [them],” Solomon said, noting that Goldman “exited the market lending business and sold our personal financial management business.” 

“I firmly believe companies should innovate and seek out new opportunities for growth,” he said. “But it is also important to be nimble and make tough decisions when needed.” 

THE BIG PICTURE: The bank made many divestments in its consumer banking operations in Q4, including: 

• Announcing in October that it would sell a majority of its consumer lending arm, GreenSky, to Sixth Street Group for $1.7 billion, with the transaction expected to close this quarter. 
• Reaching an agreement with General Motors to transition the carmaker’s credit card program to another issuer, Solomon said, noting that Goldman remains “committed to the products and servicing customers for the various transition agreements and our consumer activity.” 

In November, reports circulated that Goldman would be stepping away from Apple credit cards. The bank has lost more than $1 billion in the partnership, according to Goldman’s January 2023 8-K filing to the Securities and Exchange Commission. 

A Jan. 4, 2024, report by Bank of America Securities stated that Goldman’s move away from consumer banking is taking the institution back to basics. 

“Apple card is the last piece of the puzzle,” the report stated, noting that investors are back to viewing Goldman largely as a capital markets player, and activity in mergers and acquisitions and IPOs need to tick up to realize the gains. 

BY THE NUMBERS: In Q4, Goldman reported: 

• Net revenue of $11.3 billion, up 7% YoY; 
• Net interest income of $1.3 billion, down 35% YoY; and 
• Operating expense of $8.5 billion, up 5% YoY. 

NOTEWORTHY: The company has been taking a cautious approach toward increasing its expenses in the near term, but is eyeing the market for talent, Solomon said. 

The company’s headcount fell to 45,300, down by 7% YoY, primarily reflecting a headcount reduction initiative during the year, the bank’s earnings supplement stated.  

Goldman’s efficiency ratio for the year dropped to 75%, down 1.4 percentage points, as headcount reduction was exercised throughout the firm, according to its earnings report. 

“The efficiency ratio is obviously compensation expense,” Solomon said. “We maintained our performance [and] orientation with respect to how we size that, and you should expect the same on the floor in 2024.” 

FLASHBACK: The bank has been developing internal APIs to streamline and make operations more efficient, Brinda Bhattacharjee, chief operating officer for Transaction Banking in platform solutions at Goldman Sachs, said at Bank Automation Summit U.S. 2023. 

Goldman Sachs Transaction Banking has developed internal APIs to link global payments with its internal core system for seamless transactions, she said. 

FORWARD LOOK: Goldman has prioritized growing the bank without consumer banking, focusing on asset wealth management and global banking offerings, and creating One Goldman Sachs with unified customer offerings, as the “two businesses have extraordinarily talented and unmatched execution,” Solomon said. 

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