Goldman (GS) to Expand Private Credit, Reshuffles Executives
The Goldman Sachs Group, Inc. GS intends to capitalize on the significant growth of the private credit industry. It aims to double the size of its business with assets worth $110 billion under management over the medium term.
Per Bloomberg, Marc Nachmann stated, “We think it’s the biggest opportunity set across the alternative space.”
According to an internal memo circulated by the company, GS has been making changes in its senior executives’ positions. It appointed Greg Olafson as its global head of private credit. Also, it appointed James Reynolds as the global head of direct lending and Kevin Sterling as the global head of investment-grade private credit and asset finance.
The private credit market has shown impressive growth over the years. Per Morgan Stanley’s private credit outlook that cited Bloomberg’s January 2023 data, the size of the private credit market in the United States at the beginning of 2023 was approximately $1.4 trillion, up from $875 billion in 2020. Further, it is projected to reach $2.3 trillion by 2027.
The expansion into the private credit space will drive Goldman’s revenue growth efforts to scale back its consumer banking footprint and focus on its core strengths of investment banking, trading and asset management.
Accordingly, in October 2023, the company entered into an agreement with a consortium led by investment firm Sixth Street Partners to divest its consumer lending platform, GreenSky, and associated loans. In August 2023, it also entered into an agreement to divest its Personal Financial Management unit to the leading registered investment advisor, Creative Planning.
Last month, Goldman received a proposal from Apple Inc. AAPL to end the credit card partnership in the next 12-15 months. Per a Reuters article, the proposal included retreating from the entire consumer partnership with Goldman. This included both credit card and savings account facilities.
Goldman’s shares have risen 2.7% over the past six months compared with the industry’s 4.5% growth.
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GS presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the current scenario, Goldman is not the only one expanding into the direct lending space. Given the opportunities in this market, major banks like Citigroup Inc. C and JPMorgan Chase & Co. JPM have also been looking for prospective partners to expand their offerings in the private lending business.
C intends to enter the direct lending space by early January next year. This was reported by Bloomberg. According to a source familiar with the matter, “The initiative would complement the bank’s existing broadly syndicated leveraged finance business”. Citigroup is expected to associate with one or more partners as it would aid in providing the necessary capital for giving loans.
JPM is also on the lookout for a potential partner to enhance its operations in the private credit space. This was first reported by Bloomberg in early November. Per people familiar with the matter, the discussions were at an early stage with various sovereign wealth funds, endowments and alternate asset managers.
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Original: Investing Feed: Goldman (GS) to Expand Private Credit, Reshuffles Executives