April 17, 2018 / 4:21 PM / 4 months ago

Goldman may acquire its way to a bigger consumer bank

NEW YORK, April 17 (Reuters) - Goldman Sachs Group Inc is likely to expand its consumer bank through small acquisitions, its finance chief said on Tuesday, without ruling out the idea that it might buy a traditional lender, too.

During a conference call to discuss quarterly results, Wells Fargo analyst Mike Mayo listed the ways Goldman is trying to generate $5 billion more in annual revenue and asked Chief Financial Officer R. Martin Chavez whether it would simply buy a brick-and-mortar bank.

After explaining that Goldman has a history of building businesses internally, and a preference for “bolt-on” acquisitions, if any, Chavez suggested that management routinely considers more transformative deals.

“We are evaluating all these acquisitions, including things that you describe,” he said. “We are open-minded and it’s all part of the consideration.”

Goldman got into consumer lending much later than big U.S. banking peers, and analysts have asserted on and off through the years that acquiring a big consumer lender would help even out volatile results from businesses like trading and investment banking.

Unlike most rivals, Goldman did not make any significant acquisitions during the 2007-2009 financial crisis. Such a deal could be more difficult to accomplish now, as the industry has consolidated, values have risen and more regulatory hurdles have been put in place.

Since launching its digital consumer bank Marcus in 2016, Goldman has been growing the business by paying up for deposits, offering new products like home improvement loans and recently acquiring Clarity Money, a personal finance smartphone app.

Marcus is now lending out $3 billion of its more than $20 billion in deposits, Chavez said, making it a much smaller bank with a much lower loan-to-deposit ratio than lenders like JPMorgan Chase & Co, Bank of America Corp, or even its closest peer, Morgan Stanley.

Goldman looked at “well over 100” businesses to potentially acquire before launching Marcus, Chavez said, but none were the right fit. The company is still examining whether and how to expand offerings in credit cards, wealth management, retirement products and personal finance, he said. (Reporting by Lauren Tara LaCapra; Editing by Meredith Mazzilli)

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