Beyond investment banking, beyond the trading revenues, Goldman Sachs’ latest quarterly results reflect continued traction in consumer banking – and, through its Marcus unit, consumer banking done digitally.
In terms of the headline numbers, the company said that consolidated revenues were up 26% year over year to $13.6 billion, which was buoyed by investment banking revenues surging by about 88% year on year. The revenue results were better than the Street’s expectations at $11.7 billion.
Drilling down into the consumer-focused operations, supplemental materials released by Goldman show that within the consumer and management division, net revenues were $2 billion, up 35% year on year and 16% higher than the second quarter. Of that number, consumer banking revenues gained 17% year on year to $382 million. The consumer banking revenues were higher on credit card and loan balances, which increased, the company said on the call.
In addition, the company said that provisions for credit losses stood at $148 million in the quarter (up 185% year on year), which Goldman said reflects the growth in credit cards. Credit card loans on the balance sheet stood at $6 billion, up from $3 billion last year. Installment loans were $3 billion, down from $4 billion last year.
Digital Banking Is Gaining Traction
During the conference call with analysts, management noted that the digital banking platform and card efforts have been growing significantly over the past few years – and Marcus, specifically, has grown to more than $100 billion in deposits from a standing start of zero just five years ago.
Asked about the GreenSky acquisition and its attractiveness, CEO David Solomon said that as a public company, GreenSky did not have a funding model – but within Goldman, GreenSky has that funding in place. Bringing GreenSky in-house helps Goldman develop a merchant POS network that would have taken a decade to build.
As reported when news of the acquisition broke last month, GreenSky, since its founding in 2006, has funded home improvement borrowing options for about four million customers and has financed more than $30 billion of business improvements for the healthcare, retail and eCommerce industries. GreenSky will reportedly help Marcus broaden more fully into consumer lending.
“It allows us to expand a lot of the point of sale activities that we were doing,” Solomon said, with high returns to the company of more than 20%. Looking ahead, the firm sees regional opportunities to build its digital banking capabilities in Europe. During the Q and A, CFO Stephen Scherr said the consumer is “unquestionably a priority,” but that redeployment of capital will be spread across business lines.