Unique: Goldman Eyes Offers Promote Marcus Sources

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© Reuters. FILE PHOTO: A sign will be displayed at Goldman Sachs reception in Sydney

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By Matt Scuffham

(Reuters) – Goldman Sachs Group Inc (NYSE 🙂 is considering acquisitions to expand its Marcus consumer banking unit after the Wall Street firm slowed credit and deposit growth in its fledgling business in the wake of the coronavirus pandemic last year, three bank sources shared With.

Goldman's management has set an "extremely high" bar for a business to be big and transformative, the sources warned. According to one source, the bank had M&A bankers who were putting together numbers on "different ideas".

Digital banking is an area of ​​interest. The pandemic has strengthened management's belief that online activity will be central to the future growth of the industry and that branch offices will continue to play a lesser role, the source said. As a result, executives exclude all business that involves the acquisition of branches. Digital companies that attract new customers or unique technologies would be attractive to the bank, the source said.

Goldman Sachs declined to comment.

The expansion of Marcus, named after one of the bank's founders, is an integral part of Chief Executive David Solomon's plan to reduce Goldman's reliance on volatile commercial and investment banking revenues. To that end, Solomon aims to build predictable revenue-generating companies such as consumer banking and mass-market wealth management that most of its main competitors now have.

In January last year, Solomon set three- and five-year financial goals for Marcus as well as the company's overall profitability. The three sources said the booming investment banking and trading business during the pandemic and the cost reductions enabled by remote working have helped Goldman make significant strides in its profitability and cost reduction goals.

However, executives were concerned about the quality of credit in the midst of a recession and said they had slowed loan and deposit growth at Marcus.

When Goldman releases its fourth quarter results on Tuesday, credit growth in its consumer business, which includes Marcus and a credit card joint venture with Apple Inc (NASDAQ :), is expected to have been slower than expected, the three sources said .

The bank could warn that a goal it has set to grow consumer credit and credit card balances from $ 7 billion in January 2020 to over $ 20 billion over five years could take longer if the economic slowdown continues, the sources said.

The target of $ 125 billion in deposits over the same period is expected to be met, with market conditions expected to improve, the sources said. Total deposits at the end of the third quarter were $ 96 billion.

Goldman plans to maintain the deposit target despite regulatory restrictions in the UK, and its decision to cut interest rates on US savings accounts slowed growth dramatically in the second half of 2020. The bank added just $ 4 billion in deposits in the third quarter after adding $ 32 billion in the first half.

rival Morgan Stanley (NYSE 🙂 spent more than $ 20 billion last year on the acquisition of discount brokerage E * Trade and Investment Management Eaton Vance (NYSE :).

Analysts and industry insiders have long expected Goldman to seek to grow its consumer business through acquisitions, and some said it was time the bank did so now.

Last year, the bank settled long pending corruption investigations with the Malaysian sovereign wealth fund 1MDB, lifting a cloud that often prevents regulators from approving major acquisitions.

At the same time, regulatory sources said President-elect Joe Biden's administration could take a more restrictive stance on allowing banking than the Trump administration, which means there may be a limited window for large-scale banking.

In addition, the bank has excess capital after the US Federal Reserve decided last year to limit withdrawals.

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