Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) made headlines when the 13-F submitting for the primary quarter revealed the slashing of The Goldman Sachs Group Inc. (NYSE:GS) stake by roughly 84%. As well as, Berkshire reduce its stake in JPMorgan Chase & Co. (NYSE:JPM) by 3%.Warren Buffett (Trades, Portfolio) is commonly thought of a guru who has remained bullish on the main American banks all through the final couple of a long time, most notably through the world monetary disaster of 2008. This makes the sale of Goldman Sachs shares much more attention-grabbing to traders who’re keenly following the Oracle of Omaha to get an concept of enterprise sectors that would ship stellar returns to traders within the coming years. Opposite to the favored perception that Buffett has misplaced religion in banks, the sale of Goldman Sachs shares ought to be thought of a strategic asset allocation determination for a number of causes.The guru remains to be bullish on banksEven after trimming the Goldman stake from 12 million to only 1.92 million shares, the monetary providers sector nonetheless accounts for the lion’s share of the portfolio with a weight of 37% on the finish of the primary quarter.The publicity to this sector, nevertheless, has declined persistently from the current excessive of over 47% in September 2019, and the sale of Goldman shares is the first contributor to this improvement. Nevertheless, the truth that banks and different monetary providers firms nonetheless account for roughly 37% of Berkshire’s fairness portfolio is a transparent indication that the conglomerate is bullish on the prospects of this business.Goldman Sachs is taking part in catch upTo get a transparent concept as as to if Buffett is not optimistic concerning the prospects for banks, an investor must dig deep into the enterprise construction of Goldman Sachs to establish the way it operates and earns the majority of its income.The bank is reliant on its funding banking and world markets companies. For example, Goldman Sachs generated roughly 84% of its income from these two segments within the first quarter, in accordance with firm filings. It is essential to notice the success of each divisions is intently tied to the efficiency of world capital markets. Over the past a number of years, the bank has tried to diversify its income sources to incorporate shopper banking as nicely. Nevertheless, loans to companies account for half of its shopper loan portfolio as nicely, which provides a transparent indication of Goldman’s enterprise technique.The bank is in the course of a change story from institutional purchasers to retail purchasers, and CEO David Solomon confirmed in lots of earnings convention calls in 2019 that the bank is lastly putting extra significance on shopper banking actions. These are optimistic developments, however its friends have been making these modifications because the fallout of the monetary disaster. For example, Morgan Stanley (NYSE:MS), underneath the steerage of James Gorman, who took the helm because the CEO in 2010, was fast to establish the necessity to diversify into shopper banking enterprise actions that had the potential to ship greater returns on funding.Goldman first confirmed an curiosity in retail banking merchandise when it launched Marcus, an online-only bank specializing in high-yield financial savings accounts and unsecured private loans. One of many more moderen strikes was the partnership the bank fashioned with Apple Inc. (NASDAQ:AAPL) to facilitate Apple Card, the bank card launched in 2019. Even with all these measures, Goldman has not been capable of develop at a significant fee. A comparability of key progress metrics with Bank of America Corp. (NYSE:BAC), which is closely reliant on shopper banking, highlights this situation.Development/profitability metric Goldman Sachs Bank of America Income progress (5-year CAGR) (-0.63%) 0.26% Internet earnings progress (5-year CAGR) 0.55% 0.5% Return on fairness 8.02% 9.07% Supply: Eikon.Though Goldman Sachs has an edge in internet earnings progress, it is essential to keep in mind that Bank of America is a a lot bigger firm that generated a internet earnings of over $27 billion in 2019, which was considerably greater that the $8.four billion generated by Goldman Sachs. This lackluster monetary efficiency was the differentiator between the market efficiency of those two banks as nicely.Story continuesGoldman Sachs, nevertheless, is making regular progress within the shopper banking business, and in just some years, Marcus has seen huge success.Supply: Investor presentation.Over the subsequent couple of years, the bank expects to increase its digital merchandise providing to stay related on this new age. Eric Lane, world co-head of the patron banking division, confirmed the mission of his group throughout a convention name with analysts final yr.”We aspire to be the main digital shopper bank. We’re beginning with loans, we added financial savings and playing cards, and we’re working to construct out the steadiness of the digital merchandise suite, together with wealth and checking.” The expansion of the patron banking section won’t solely assist the corporate’s earnings, however may also cut back its value of capital. In keeping with Goldman Sachs Chief Monetary Officer Steven Scherr, for each $10 billion in new deposits, the price of capital will decline by $80 million.As a lot as these numbers are promising, Goldman is just a few years behind its closest rivals, which embody Bank of America, Morgan Stanley and JPMorgan. If the danger of a recession didn’t materialize for just a few years, the bank would have been capable of meet up with its friends and be in a greater place to climate future financial crises. Nevertheless, now that the US is already in a recession, Goldman Sachs may turn into one of many hardest-hit banks and the restoration will doubtless take extra time compared to rivals.The funding banking business remains to be reeling from the losses seen through the world monetary disaster, and the shrinking credit score enterprise is on the core of this secular decline.Supply: Harvard Enterprise Assessment.This decline in business income will doubtless persist over the subsequent few years as nicely, which isn’t an encouraging signal for Goldman Sachs.TakeawayThe disposal of Goldman Sachs shares by Berkshire Hathaway has been interpreted by some traders as an indication that Buffett is dropping curiosity within the banking sector. Quite the opposite, the conglomerate is the biggest investor in Bank of America, and within the first quarter, elevated its stake in PNC Monetary Providers Group Inc. (NYSE:PNC). A better have a look at Goldman’s enterprise construction reveals the bank remains to be reliant on its funding banking actions that may come underneath strain within the coming years. Due to this fact, the choice to trim the Goldman stake may very well be a strategic one, not a sign of additional troubles for the banking business.Disclosure: I don’t personal any shares talked about on this article.Learn extra right here:Not a Premium Member of GuruFocus? Join a free 7-day trial right here.This text first appeared on GuruFocus.