Goldman Sachs’ strategic shift in lending activity

The investment bank is attacking the credit market for individuals and businesses

It’s a bit like a Formula One driver turning into his spare time as a VTC driver. Goldman Sachs (GS), the Ferrari of finance, the undisputed master of investment banking and wealth management, is accelerating its development in lending to individuals and businesses, according to sources close to the record cited by the Wall Street Journal. For the group, tackling the credit market, like conventional retail banks, is a cultural revolution.

“We are a bank, we should act as such,” Lloyd Blankfein, CEO of GS, warned in February. This desire for widespread banalisation is explained by the profound change in the banking world since the 2008 financial crisis. Under pressure from regulators, the sector has been led to reducing its exposure to risk and speculation, which now weighs profitability of the establishments, which never regained their level of profit before the crisis of 2008.

The credit outstanding of the bank have doubled since 2011 to reach 95 billion dollars

Since then, investors prefer to bet on banks present on all trades, both the investment bank and retail. A choice, which guarantees more modest income but also more regular. It is this context that has led GS today to accelerate its diversification. The lending activity is a growth driver, as the merchant’s potential is becoming aware that, in its historical businesses, such as mergers and acquisitions or IPOs, the market is not expandable. ‘infinite. In credit, “we can only grow,” says Stephen Scherr, the boss of GS in the United States.

The bank’s outstanding loans have doubled since 2011 to reach $ 95 billion, the volume of home loans has increased tenfold and business credit has tripled. But it was only in January of this year that the group created a specific entity dedicated to individuals and the commercial bank, bringing together several hundred employees.

This change is accompanied by a profound change in recruitment, as the merchant bank does not hesitate to bring in some of the biggest names in the sector, such as credit card specialists, Discover or Capital One, as well as marketing professionals. and the commercial, for example from the world of distribution.

This strategic shift has its roots in the crisis, when in September 2008, short of cash due to withdrawals by its customers and the fall of its market valuation, GS had agreed to change its legal status to become a commercial bank, which allowed him to access the liquidity proposed by the government to extinguish the financial fire. But this status of the commercial bank, long remained an empty shell, was really reactivated only after a decision dating back to summer 2014.

A second step was taken in the fall of 2016 with the creation of Marcus, an online lending activity for individuals. This entity has lent more than $ 1 billion in six months. At the same time, the bank is also seeking to develop business loans during mergers and acquisitions- Bdsonline.

Goldman Sachs plans to embark on auto loans or loans for internet purchases

In the space of three years, she moved from 9th to 3rd place in this area. Deposits have soared dramatically, from $ 28 billion in 2008 to $ 124 billion today, although GS is not yet in the same category as JPMorgan, which totals $ 1.4 trillion. But Llyod Blankfein’s bank does not intend to stop there and is now considering getting into car loans or loans for Internet purchases. The question now is whether an F1 driver can become a good VTC driver.