Goldman Sachs has postponed the German launch of its consumer bank Marcus until next year after the six-month Brexit delay removed the urgency for setting up a new deposit base within the EU.
Launched in late 2016, Marcus is part of the 150-year-old group’s reinvention as a financial institution that caters to everyone from individual savers to small and midsized business, alongside the hedge funds, asset managers and wealthy clients it traditionally served.
As well as seizing on the chance to create a high-tech bank without the legacy problems of older rivals, Goldman is using the retail banking unit to attract deposits, lowering its funding costs compared with traditionally more expensive bond finance.
Goldman’s latest earnings showed Marcus’s deposit base had swelled to $46bn. The bulk of that has been accumulated in the US, where it offers high-interest savings products and some loans. In the UK, where it opened last year with a savings product it has attracted $10bn, according to one person familiar with the operation.
Privately executives have signalled an ambition to raise as much as $250bn through Marcus, enough to fund more than a quarter of Goldman’s $900bn plus total assets.
Richard Gnodde, who heads Goldman Sachs International, announced plans to expand Marcus into Germany in an interview with the FT a year ago. The initiative was expected to launch in 2019 to coincide with Brexit and the need to fund EU commitments through a local base. At the same time Goldman’s new group chief executive David Solomon has been keen to turbo-charge the shift in Goldman’s priorities towards consumer banking.
But two people familiar with the plans told the FT that the timeline had been revised. “We want euro deposits and Germany will be where it is,” one of those people said.
“If [Brexit] had happened [on] March 29, we would have wanted [Germany] more urgently,” the person added, referring to the need to fund the trading operation that Goldman has set up in Frankfurt to deal with EU clients, but which is not yet needed.
The person said ramping up Marcus would also have been “expensive”, adding that given Mr Solomon’s sharper focus on costs across Goldman “that’s a little bit in our thinking”.
Goldman won plaudits for cost control in the first quarter, and is already facing added overheads from launching a new credit card with Apple and a cash management operation. Both are designed to provide a stable earnings stream that can blunt the highs and lows of more volatile trading activities.
Goldman declined to comment in detail on its German plans but Des McDaid, head of Marcus in the UK, told the FT: “The launch of Marcus in the UK has been tremendously successful and we are focused on expanding our UK offering before we launch in other countries.”
On Goldman’s first-quarter earnings call last month, the company announced a new target of adding $10bn in Marcus deposits annually as part of what chief financial officer Stephen Scherr described as a strategy to build “one coherent [consumer] business” including Marcus, the Apple card, and a push into managing money for the “mass affluent”.
Investors had been hoping to hear an update on a strategic review this year, but Goldman has postponed that update until 2020.
