Deposits spiked $20 billion in Q2 2020 to reach $92 billion. Goldman Sachs’ consumer banking business is primarily composed of Apple Card — its cobranded credit card that launched last year — and Marcus, its digital-only offshoot which offers personal loans and a high-yield savings account.
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Consumer revenue was up 19% annually to hit $258 billion, though this marks a deceleration from 39% annual growth in Q1 2020. Like other major US banks this quarter, Goldman increased its loan loss provisions to $1.59 billion, up from $937 million in Q1 2020.
Goldman’s proactive approach to customer relief during the pandemic likely drove the consumer unit’s strong performance, and was enabled by the bank’s diversified structure.
- Goldman was at the forefront of US banks in extending pandemic relief options. By mid-March, Apple Card customers could skip their March payments without incurring interest, which came weeks before some competing banks extended comparable options. Goldman has since extended the option through July. And as of April, the bank reported a higher percentage of its consumer loan customers opting for deferrals than its competitors did, which could be indicative of offering the option early, as well as working closely with customers.
- Goldman’s current diversified structure is likely allowing it to extend deferrals without taking as big of a hit as other banks. That Goldman’s largest share of revenue comes from trading and investment banking has been considered a detriment in the past, but its model is now an advantage: The smaller size of its consumer bank relative to mature competitors likely affords Goldman flexibility to extend forbearance at a higher rate with less of an effect on its bottom line. That benefit is also reflected in Goldman’s smaller loan loss reserves relative to competitors like JPMorgan Chase ($8.9 billion) and Wells Fargo ($8.4 billion).
To maintain its deposit momentum going forward, Goldman should identify new incentives for its high-yield savings account, as interest rates continue to decline. Goldman’s consumer business is still young, and it has big ambitions for Marcus.
But the firm has cut interest rates on its Marcus savings account several times this year, to 1.05%, and while this remains higher than the national average of 0.18%, it could dampen consumer enthusiasm for saving with the bank. Goldman might need to add other value-add features — such as advanced money management tools — to its offering in order to continue driving deposits.
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