Goldman Sachs paid price for expansion into consumer banking

Register now

Goldman Sachs offered a glimpse Tuesday at the size of its investments in consumer banking — an area where the Wall Street giant lacked any presence just a few years ago.

Since 2016, Goldman has launched a consumer deposit franchise and an installment loan product, both of which operate under the Marcus brand. Later this summer, the company is expected to release a highly anticipated credit card in a partnership with Apple.

Goldman revealed Tuesday that those consumer-facing businesses — along with a new transaction banking platform that is designed for corporate customers — have resulted in cumulative pretax losses of $1.3 billion.

As the new businesses achieve greater scale, they should become an accretive contributor to the company’s return on equity, Chief Financial Officer Stephen Scherr said during the firm’s quarterly earnings call.

Since October 2016, Goldman Sachs has reportedly originated more than $5 billion of personal loans to consumers. But Scherr said Tuesday that Goldman has slowed the increase in growth in anticipation of the launch of its inaugural credit card.

In October 2018, Bloomberg reported that Goldman was reining in its loan origination target for Marcus amid concern about the late stage of the credit cycle and changes in market data.

Goldman has international ambitions in consumer banking. The firm currently offers an online savings account in the U.K., and executives said Tuesday that they see opportunities to expand in that market.

They also acknowledged the logic of an eventual expansion of Marcus into Germany, but said that it is too early to forecast if and when that might happen.

Goldman reported net earnings of $2.42 billion in the second quarter, which was down 6% from the same period a year earlier. Net revenue totaled $9.46 billion, which was down 2% from the second quarter of 2018.

For reprint and licensing requests for this article, click here.
Consumer lending Marketplace lending Deposits Consumer banking Goldman Sachs
MORE FROM AMERICAN BANKER