Goldman's Marcus At $72B In Deposits

It’s becoming a familiar refrain on Wall Street: reserves to cover potential soured loans.

On Wednesday (April 15), Goldman Sachs reported earnings that, like other marquee names in banking, showed the firm took reserves amid a worsening macro environment as the coronavirus impact continues.

The company’s total net revenues for the first quarter, as measured year over year, were roughly flat at $8.7 billion, better than analyst expectations of $7.9 billion. Earnings per share, hit by the reserves, fell to $3.11 from $5.71 a year ago and missed analyst expectations of $3.35.

The provision for credit losses stood at $937 million, up from $224 million last year and $336 million during the fourth quarter of 2019.

Goldman’s Marcus, the consumer bank, logged a $12 billion boost in deposits, and at the end of the quarter, the tally stood at $72 billion.

In the first quarter, net revenues were $8.7 billion, roughly flat versus a year ago.

“Our business performed well in both January and February as markets notched new highs driven by client confidence in activity,” CEO David Solomon said on the conference call with analysts.

But he said early March marked a change as the coronavirus impacted financial markets.

With a nod toward the pressures on the macro backdrop, he said annualized U.S. GDP is forecast to decline in excess of 30 percent in the current quarter and will recover in the back half of the year. All in, he said, forecasts project a 6 percent contraction for the year.

Yet he also said during the call that “our transaction banking rollout remains on track, and our growth in corporate deposits has exceeded expectations.” Goldman said in supplemental materials provided alongside earnings that it funded $19 billion of loans in the quarter to corporate clients.

Chief Financial Officer Stephen Scherr gave a bit more granular detail on Marcus, stating that “performance in March was solid with $4 billion of monthly growth, providing a valuable source of funding to the firm.”

Funded consumer loan balances remained stable at $7 billion, of which $5 billion was from Marcus consumer loans and $2 billion from credit card. The company has said it would let consumers defer a Marcus loan or an Apple Card payment for up to two months with no fees or penalty, and customers could also access funds from Marcus CDs early with no penalty.

“Going forward, we expect to see a more modest level of growth in both Marcus unsecured loans and Apple Card as we seek to manage our risk profile and reduce the pace of origination during this period of market and economic dislocation,” Scherr told analysts.

At the end of the quarter, the total allowance for credit losses stood at $3.2 billion.

Management also said on the call that the company had net $14 billion of total lending and counterparty exposure to the oil and gas sector.