Ever since it became a bank holding company in 2008 to stay afloat in the financial crisis, the bank was urged by US Federal Reserve to rely more on ‘sticky’ consumer deposits to lower its risk profile.
Goldman Sachs, the icon of US investment banking, is moving into online consumer lending in a big way, in response to regulatory pressures and new financial technology.
Ever since it became a bank holding company in 2008 to stay afloat in the financial crisis, Goldman was urged by the Federal Reserve to rely more on ‘sticky’ consumer deposits to lower its risk profile.
Marcus, Goldman’s consumer lending platform, was launched in the US last October and has provided more than $1 billion in unsecured personal loans. Those loans have higher returns on assets than Goldman’s traditional business. Goldman is now looking to expand its retail banking business to the UK next year under the Marcus brand.
Goldman is also providing £100 million ($136 million) of debt and equity financing to UK consumer lender Neyber, a fintech start-up that provides loans that are repaid directly from a borrower’s salary. Founded five years ago by two former Goldman investment bankers, Neyber partners with companies to offer loans to their employees at interest rates that are lower than those on credit cards. Annual rates for “great” customers are 4.9%, while “good” customers are charged 6.9% and “OK” customers pay 9.9%.
In July, Goldman unveiled a new digital platform, GS Select, where customers of other wealth-management firms and brokerages can apply for loans of $75,000 to $25 million using their portfolios as collateral. Goldman is partnering with Fidelity Investment’s clearing and custody business.
Last month, Goldman agreed to purchase $300 million of loans provided for US home solar-power installations from financing provider Solar Mosaic. Goldman also recently invested in My Lender, an online consumer lender in Finland.
Goldman’s push into consumer lending comes at a time when its traditional businesses, such as fixed-income trading, have slowed. Harvey Schwartz, Goldman’s president and co-chief operating officer, says that more than $2 billion of the firm’s potential net revenue growth of more than $5 billion expected in the next three years will come from lending and financing efforts. —GP