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Goldman hopes high rates will lure consumers to online bank

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04/27/2017 | 09:30pm CEST
FILE PHOTO - A sign is displayed in the reception of the Sydney offices of Goldman Sachs in Australia

Goldman Sachs Group Inc (>> Goldman Sachs Group Inc) plans to promote its high-interest bearing deposit products in a marketing push to consumers later this year as it looks to grow its online bank, Chief Strategy Officer Stephen Scherr said in an interview on Thursday.

Goldman Sachs Group Inc (>> Goldman Sachs Group Inc) plans to promote its high-interest bearing deposit products in a marketing push to consumers later this year as it looks to grow its online bank, Chief Strategy Officer Stephen Scherr said in an interview on Thursday.

Historically known as an adviser to the world's richest people and corporations, Goldman Sachs has been trying to do more business with ordinary consumers to diversify its business and have a more stable source of funding.

A little over a year ago, the Wall Street bank acquired $16 billion worth of online deposits from General Electric Co (>> General Electric Company), about half of which came from individuals. Goldman has since increased those deposits by $4 billion, or 50 percent, and wants to grow more, Scherr said.

"It carries ... great strategic potential," he said. "The ambition we have is for the retail deposit platform to grow so that it becomes a real, sizable channel."

By acquiring GE's deposits, Goldman began a process that may help it better weather future disasters. Deposits are less likely to disappear during times of stress than other funding sources because they are federally insured. Regulators have been pushing big Wall Street banks to rely more on deposits since the 2008 financial crisis.

Goldman's online deposits from individuals now total $12 billion. Although they have grown quickly, they are still a small fraction of the $124 billion in overall deposits on Goldman's balance sheet and an even tinier fraction of deposits at banks with sprawling branch networks. JPMorgan Chase & Co (>> JPMorgan Chase & Co.), for instance, holds $1.4 trillion in deposits.

Goldman has been offering a competitive interest rate of 1.05 percent for digital savings accounts to attract new customers. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.

The bank offers even higher rates for depositors who agree to lock their money up for a set period of time, through products like certificates of deposit.

Deposits will help Goldman boost profits if it can find ways to lend them profitably. The bank is looking to move further into traditional lending broadly across wealth management to investment banking, as businesses like trading struggle to generate the type of returns they once did.

Last year, the bank launched Marcus, its first major foray into consumer lending which is led by former Discover Financial Services (>> Discover Financial Services) executive Harit Talwar. It also acquired Honest Dollar, an online retirement savings platform for small businesses and startups.

(Reporting by Olivia Oran in New York; editing by Lauren Tara LaCapra and Chizu Nomiyama)

By Olivia Oran

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Financials ($)
Sales 2017 125 364 M
EBIT 2017 18 202 M
Net income 2017 12 790 M
Debt 2017 19 305 M
Yield 2017 3,30%
P/E ratio 2017 19,78
P/E ratio 2018 16,38
EV / Sales 2017 2,19x
EV / Sales 2018 2,10x
Capitalization 254 817 M
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Mean consensus OUTPERFORM
Number of Analysts 17
Average target price 32,6 $
Spread / Average Target 11%
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Jeffrey R. Immelt Chairman & Chief Executive Officer
Shane Fitzsimons Senior Vice President-Global Operations
Jeffrey S. Bornstein Chief Financial Officer & Senior Vice President
Jim Fowler Chief Information Officer
Victor Abate Chief Technology Officer & Senior Vice President
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