Since the Great Recession, Goldman Sachs Group Inc. (NYSE: GS) has been regulated as a bank holding company. After all, the bank was a recipient of $10 billion of the notorious TARP bailout money that gave liquidity to the banks during the financial crisis. One small problem ahead of the bailouts was that Goldman Sachs did not, and had not in our lifetimes, actually operated as a retail bank.
Starting in 2016, there was a semi-quiet push for an online lending and deposit platform, which is now named Marcus, after Goldman Sachs had decided to acquire GE Capital’s online loan platform. This unit operates under Goldman Sachs and is a brand of Goldman Sachs Bank USA.
For about a decade now, it has been very hard for the public to think of Goldman Sachs as a bank holding company, even if it is classified as one. If it has no retail banking operations that deal with Joe Public, it doesn’t really feel like a bank. And if Goldman Sachs only deals with wealth management and financial services for wealthy individuals and institutions, it sure doesn’t feel like a real bank. But since Goldman Sachs received bank bailout money during the recession, it is now regulated in many ways similar to its rival bulge bracket investment banks, which also have retail banking operations with millions of retail customers. And maybe the technology shift to an online future makes many brick-and-mortar banking operations largely irrelevant.
The big issue here is whether the growth opportunity for Marcus as an online lending and deposit platform is potentially large enough that it could change the future image of Goldman Sachs. It is possible that Marcus by Goldman Sachs could become the online bank for Joe Public rather than just for Richie Rich. It is no secret that the firm’s nickname has been “Golden Slacks” for years.
Goldman Sachs already has said that it will grow Marcus in a manner that will still add to its shareholder returns. The company also acquired Clarity Money in 2018, with its community of more than 1,000,000 customers, and said that its app will remain 100% free to use. Goldman Sachs has even been advertising its Marcus effort through traditional advertising methods.
Marcus offers no-fee and fixed-rate loans from $3,500 to $40,000. As for the loan types, these are debt or credit card consolidation loans, online loans, unsecured loans and even home improvement loans. This might not be an issued Goldman Sachs credit card, but it’s certainly the “Online Retail Bank of Goldman Sachs.”
And on the deposit front, Marcus offers online savings accounts with a current 1.60% yield (likely to change as rates change) that is higher than most traditional banks. It has certificates of deposit (which most investors forgot about during the zero-rate environment) with current yields of 2.10% for 12 months, 2.20% for two years, 2.35% for three years and 2.75% for five years. Current Treasury yields are listed for a comparison as follows: 2.14% for one year, 2.39% for two years, 2.52% for three years and 2.68% for five years. Marcus says that clients only need a $500 minimum to open a CD and to earn stated annual percentage yield.
Getting detailed information on the internal results of Marcus has not been as easy as it is with traditional banks, because it is still a small unit within a financial giant. 24/7 Wall St. did get some information from the 2017 Goldman Sachs annual report, but admittedly this was ahead of its Clarity Money acquisition. The firm does not appear to be on track to open many brick-and-mortar branches like a traditional bank, as it is using technology solutions to meet client needs.