Earnings

Goldman’s Marcus Deposits Increase $4B In Q3 To $96B

Goldman Sachs

Goldman Sachs’ latest results showed continued traction in its digital, consumer banking efforts even as its core trading and asset management segments soared.

In terms of headline numbers, the earnings per share of $9.68 were well above the $5.57 consensus.

Revenues, driven by asset management and trading, were up 30 percent to $10.8 billion on a consolidated basis. That was roughly $1 billion better than had been expected.

As has been seen with other large financial services firms, provision for credit losses improved, to $278 million in the latest period, down 4 percent year on year and a significant 83 percent lower than had been seen in the second quarter. The reserve reductions, the company said, come from loan paydowns, at least partially offset by growth in credit card loans. Management provided some additional detail on the earnings call that showed there was a $7 billion decrease in corporate loans and a $1 billion decrease in Marcus loans.

Net revenues in the consumer and wealth management space were up 13 percent year over year, to $1.5 billion, and the provision for credit losses stood at $52 million, off 50 percent year on year. Consumer banking was $326 million, up 50 percent year over year and 26 sequentially.

Consumer deposits — that would include  Marcus, of course — stood at $96 billion at the end of the quarter, according to supplemental materials from the company. That’s $4 billion higher than the previous quarter.

As has been previously reported, Goldman said at the beginning of 2020 that it has been targeting $125 billion in consumer deposit balances over five years.

CFO Stephen Scherr said on the call that “the slower pace was expected as we continued to limit U.K. new account growth in light of regulatory caps and reduced the rate on our U.S. market savings accounts given the lower interest rate environment.” He added that funded consumer loan balances were $7 billion, of which $4 billion were from Marcus, and $3 billion were from Apple Card.

In reference to consumer-facing initiatives, CEO David Solomon noted, “We continue to have success expanding our platform to serve individuals digitally, both directly and through partnerships.” He said that during the period, Goldman launched Marcus Insights integrating Clarity Money’s capabilities into the Marcus app “to give consumers a more comprehensive view of their finances, and we continued to make progress building checking and investment capabilities which will launch next year.” The company also launched seller financing with Walmart.

“Additionally, our partnership with Apple continues to grow and we look forward to leveraging our credit card platform for additional partnerships over time,” Solomon told analysts.

With further detail in the Wealth Management business, CEO Solomon said on the call that “we obviously are building a broader consumer wealth platform to serve individuals and we certainly think there can be opportunities to accelerate the growth of that. In fact, last year we made an acquisition in United Capital that we think accelerated our expansion into high net worth wealth in a meaningful way, and we’ve now been integrating that quite successfully.”

He added too, that in its consumer-focused efforts, the company has been “building a digital consumer platform that marries our strong expertise in wealth while also providing a digital experience for general banking services for consumers. We’re committed to it, we believe in it, but we want to be perfectly clear — this is something that’s going to be built over a long period of time.”

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