MAIN STREET EFFORTS AT GOLDMAN SACHS – BANKING

Trading, the Goldman Sachs’ money making mainstay, has been in decline in recent years at the firm.

Thus, in 2016, the firm began a “move to main street,” (ref. WSJ).  Thus far, the process has been far from lucrative, causing Goldman to lose $1.3 billion since its launch of the new process.  They began by kicking out a “couple dozen” profitable traders from their desks to make room for the firm’s new consumer bank, which is operating under the brand of Marcus.  The new bank has pushed into savings accounts and credit cards and has, thus far, been a money pit rather than a successful operation.  Initially, Goldman spent heavily on purchasing startups and cloud-storage space, then on hiring hundreds of techies, as well as building call centers in Utah and Texas.  Regrettably, however, the loans that have been issued, to date, have gone bad at a rate that exceeds that of rivals.  Part of that problem has arisen from the fact that Marcus launched without having formed a collection team to chase down delinquent borrowers.  The credit card launched with Apple has been relatively successful, but that success was costly, requiring thousands of Goldman engineers to need to be diverted from regular duties in order to finish the card offering in time for its August debut.  And, even so, the Apple cards carry the phrase “designed by Apple, not a bank.”  Sounds like Goldman lost out on a lot of the oversight that should have been performed when these processes were being developed.  What is it that we always say about “all the moving parts” – ?  Since Goldman brings in less revenue than it did in 2010, it has a lot riding on ultimately getting this process right.  Those speaking in favor of the new tack, say that Marcus has lured tech talent to the firm and has proven that it can stand up new businesses, indicating, as well, that Marcus’ savings accounts have gathered $50 billion in deposits, a new type of low-cost funding for the bank.  Thus far, three years in, Goldman hasn’t settled on an identity for Marcus – it has been cast as a “Silicon Valley startup where coders sip kombucha from a tap at their WeWork offices San Francisco” as well as a throwback to earlier times, with the simple “M” on a wooden sign that could be swinging from a general store.  Without a doubt, meshing Goldman’s buttoned up culture with an influx of new talent has been a challenge – and, one that is, to date, ongoing.  We’ll be following and discussing the progress.

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