Goldman Sachs explores sale of lender GreenSky: Report

Goldman Sachs (GS) is reportedly exploring the sale of specialty lender GreenSky, according to the Wall Street Journal. This move comes after Goldman Sachs struck a deal to sell its Personal Finance Management (PFM) unit to Creative Planning in late August.

Yahoo Finance Reporter David Hollerith joins the Live show to break down GreenSky's value since Goldman Sachs acquired it, as investors keep a close watch on CEO David Solomon's position at the company, while explaining developments in broker deposits across U.S. banks

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: All right, well, more color on Goldman Sachs' awaited sale of specialty lender GreenSky came last night from the "Wall Street Journal". Let's bring in Yahoo Finance's David Hollerith to give us those details. Hey, David.

DAVID HOLLERITH: Hey, Rachelle. So this is part of Goldman's larger push out of consumer lending, and Goldman has said as far back as its Investor Day in February that it was considering selling GreenSky. Now, from the "Wall Street Journal" story that came out last night, it appears that the sale for GreenSky is sort of at its final innings, with the bidding, according to the "Journal", including KKR and PIMCO, as well as San Francisco-headquartered Sixth Street, which currently holds the leading bid.

Now, the deal is expected to be valued at $500 million, which is approximately 71% less than the %1 billion-- or, excuse me, $1.73 billion that Goldman paid for GreenSky in the first quarter of 2022. So that was an all stock transaction, and the possible sale of GreenSky obviously has been something that is kind of seen as like the biggest step that Goldman needs to take to sort of finish this sort of tricky pull out of consumer lending that it announced as early as the fourth quarter of last year, but this is obviously something that we're paying a lot of attention to.

Last week at a Barclays conference, CEO David Solomon did not have a ton to add on the GreenSky deal, and he said that the bank would report more once the transaction is closed, but that they have been in the marketing process to sell GreenSky. And obviously, just to hit on the strategy overall, the remaining consumer finance products that Goldman has, they're still trying to bring those to profitability, and since 2020, the bank has lost about $4 billion on consumer lending, or consumer finance products, excuse me, so this is obviously a tricky thing that a lot of investors are waiting to see to be ended.

RACHELLE AKUFFO: And, David, I know that you've also been paying attention to the deposit story at small banks. Now, they've regained about half of what they lost since SVB failed, but the mix is different. Can you break that down for us?

DAVID HOLLERITH: Yeah, so, you know, a really good thing is that small banks, or those outside of the 25 largest in the country, have regained the most deposits they've had since SVB's collapse, so that's very good, and it's kind of opposite of what we saw in the first quarter and the beginning of the second, which was that it looked like most deposits were sort of fleeing to larger banks in sort of a flight to safety.

And now what we've seen is that banks have been paying overall and across the industry more on their rates to depositors to retain customers, and obviously that cuts into profitability. And sort of the most extreme example of this is brokered deposits, and brokered deposits are almost exclusively focused on rate payments for prices. There's a third party that sort of matches rate seeking or a high rate seeking depositor with a bank for a price. So there's not really as much of a relationship built in.

And this was addressed by the FDIC's chairman Martin Gruenberg earlier this month, and he did point out that broker deposits do present liquidity risks for banks. It's a lot harder to rely on those funds when a bank might be cash strapped or needing to quickly repay financial obligations. But that being said, brokered deposits do kind of get a bad rap. They're seen as much better than a bank borrowing from the US government in some capacity, and, you know, it really also depends on which bank you're looking at.

But the change in the last year has been pretty significant. We've seen about an 86% increase in brokered deposits across the industry. Now, that means that still brokered brokered deposits make up a pretty small amount of total deposits in the banking system, only about 6.5%, but at certain banks, and Martin Gruenberg also pointed this out, it can vary a lot.

And, you know, we're looking at certain smaller banks such as Comerica, as well as Western Alliance and Customers Banks all as having, you know, pretty significantly high amounts of brokered deposits. Now, again, this isn't really bad on its surface, but it does pose an issue in terms of liquidity, and it's something we're going to focus on a lot more as these banks try to maintain profitability.

RACHELLE AKUFFO: We'll certainly be keeping track of that. Appreciate you breaking all of that down for us our. Very own David Hollerith. Thank you so much.