Two dozen av
Goldman Sachs Group
The most profitable traders were kicked off the desk last year to make room for the rising ranks of the company's lending arm from Main Street.
Harit Talwar, the newcomer's boss wearing allbirds running shoes, ribbed his counterpart, a Briton by the name
which favors sharp suits and ties tied in a double Windsor. "Thank you for making all the money we spend," he said, according to a person who heard the exchange.
With his core business in commerce and deals on the way, Goldman has squeezed in savings accounts and credit cards. Still, the makeover is a money pit ̵[ads1]1; and challenges its identity as a titan of high finances.
Goldman's new consumer bank, operating under the Marcus brand, has lost $ 1.3 billion since its launch in 2016. It spent a lot on buying startups and cloud storage, hiring hundreds of technologies and building call centers in Utah and Texas . Loans have fared worse with higher interest rates than with competitors.
Marcus launched without a collections team to chase unsuccessful borrowers, resulting in early loan losses, say people familiar with the case. A credit card developed with Apple Inc. was a bargain, but a costly one: Thousands of engineers all over Goldman were redirected to complete it in time for a debut in August, which delayed other projects. Apple ads for the card had the phrase: "Designed by Apple, not a bank" – a line that didn't show up in a giant banner ad in Goldman's lobby this fall.
It's still early days, but Goldman has a lot of bikes to do this. The company generates less revenue than it did in 2010. The shares trade under competitors with large consumer companies, which are now in vogue with investors for their predictability and low turnover to retail.
Mr. Talwar's joke to Mr. Salisbury captures the tension between Marcus and the dealers whose money they burn through. Even those who buy into the CEO
The vision of a more rounded Goldman still will as their bonus checks shrink, as they are likely to do again this year. Dozens of longtime partners leave.
The tension cuts both ways. Encoders inhabited from Silicon Valley received requests for Macbooks rejected by Goldman's compliance department, employees said. Salisbury's traders, cornered on a corner on the 26th floor of the bank's headquarters, complained that the bathroom had become too crowded.
A poll commissioned by Goldman last spring asked Marcus customers if the brand was "downmarket," a heartburn induction word at a company known to advise billionaires and large corporations.
Meanwhile, the type of loan Marcus offers is the first to fail in a recession and is not backed by collateral, as is the mortgage. Goldman withdrew lending to consumers this year after the losses were higher than expected, said people familiar with the matter.
Managers say Marcus has helped lure the technology talent to the company and has proven that Goldman can set up new businesses. They also point to the success of Marcus's savings accounts, which have raised $ 50 billion in deposits, a new type of low-cost financing for the bank.
"We develop muscles we didn't know we had," she said
who runs Marcus in the United States
A hat with the letters MVP hangs on the office door, a gift from the team. At the old Goldman, that would mean "most valuable player." On the new Goldman, it means "the least viable product", technical speech for a new offering that's ready to be launched – if only barely.
For most of its 150-year history, Goldman dominated the high end of financing. It invented virtually institutional stockbroking in the 1960s and the modern initial offering of the 1980s. It brokered $ 1.3 trillion to corporate mergers last year.
These profit engines have sputtered since the financial crisis. New regulations have yielded returns from securities brokers, who earn less than half of the revenue they made a decade ago. Goldman once invested billions of his own money in deals; also it is off limits.
Goldman's shares are fixed at 2014 levels. Investors have instead flocked to rivals such as
& Co. and
Bank of America
, giving rise to steady profit from lending and money management.
Marcus, hatched by a gathering of leaders in the Hamptons, the exclusive New York enclave, was meant to grow the company again. With a blank canvas and a generous budget, leaders believed they could pick up business from slower rivals.
Marcus debuted two years later to take personal loans of a few thousand dollars. It also offered savings accounts online that customers could open with as little as $ 1.
Naming the startup after the bank's 19th-century immigrant founder gave it a piece of the Goldman brand, still obsessed with its role in the 2008 collapse. Unpleasant memories of the crisis informed other early decisions.
Leaders were worried that aggressive debt collection efforts would dredge a predator image they had spent many years trying to stamp out. So Marcus launched without a team of specialists to contact criminal borrowers and try to recover what they owed, said people familiar with the matter. When the first borrowers fell behind, Goldman lost more money than it should have, these people said.
The bank now has dedicated collections that are specially trained, a spokesman said.
It still has higher loan losses than competitors. Goldman depreciated $ 156 million in 2018 and another $ 155 million in the first six months of 2019, according to public filings. In the year ended June 30, the loss accounted for 5.5% of the loan book, higher than peers
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and above the 4% estimate previously provided by Goldman executives.
Although the bank was on the lookout for heavy debt collection, in at least one case it exceeded.
In August last year, an Oklahoma woman filed for bankruptcy that included a $ 19,894 Marcus loan. By default in personal bankruptcies, Goldman barred the court from attempting to collect the debt.
Goldman contacted her nine times over the next two weeks to get a refund, even after her lawyer sent another letter notifying the bank that she had filed for bankruptcy, the woman alleged in the court filing.
Goldman settled the case.
& # 39; Not a bank & # 39;
Goldman does not have a mark that consumers know or physical branches to pull them in from the street. So it is looking for other ways to get the word out, get it or collaborate with well-known brands that can bring their own customers and caches.
It is the company manager of “staff Marcus @ Work” who offers financial education to employees. It is also in talks with AARP, the pension organization, to provide banking services to its 38 million members, say people familiar with the matter.
Last year, it purchased Clarity Money, a personal finance app with more than 1 million users. It is one of several hairdressers looking at
An online lender exploring a sale, according to people familiar with the matter.
AARP and Goldman declined to comment. GreenSky did not respond to a request for comment.
Finding customers through well-known partners saves Goldman the hassle of building network branches and sending out millions of live streams, as Marcus did in the early days.
But it throws Goldman as a supplier that in most cases, these partners need more than they need it.
This imbalance was shown in collaboration with Apple to launch a credit card, Goldman's first. The cost of knocking out other banks accepted a number of claims from Apple, which are famously design-obsessed and demanding in their dealings with partners, according to people familiar with the matter.
Goldman agreed not to take late fees or sell customer data, trading away two important ways credit card issuers make money.
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Apple wanted control over the monthly statements sent to cardholders, pushing for jargon-free disclosures and their own signature font. Goldman's lawyers warned that turning away from standard industrial language may invite regulatory problems, but the bank compromised. Apple got the font and Goldman trimmed the fine print.
Apple and Goldman declined to comment.
Apple initially wanted to charge everyone the same interest rate, regardless of credit score, say people familiar with the matter. At this point, Goldman pushed back. The card currently charges between 13% and 24%.
When Apple unveiled the credit card on stage in March in Cupertino, California, it did so with a zipper: "Designed by Apple, not a bank." Mr. Solomon and other Goldman leaders followed from the crowd. The same line was repeated in ads that Apple ran to promote the card.
In a final snub, Marcus executives were not allowed into a Tribeca loft that served as Apple's command center in the days leading up to the card's launch in August.
Even beyond the roughly $ 300 million Goldman spent to build it, the Apple card was a drain on the company's resources. When early testing of the software this spring revealed a security vulnerability, Goldman assigned thousands of engineers from across the company to patch it, said people familiar with the matter.
This set other initiatives months after the plan, these people said. A Marcus budgeting app and digital wealth management tool scheduled for early next year are now expected by the end of 2020.
Leaders say the cost is justified by the chance to reach hundreds of millions of iPhone users, a young, wealthy gang which may be converted to Marcus customers.
In particular, Goldman wants its deposit dollars, a cheap source of funding for the bank. Every $ 10 billion in deposits collected Goldman saves $ 100 million a year, Goldman's chief financial officer,
said in April.
Three years in, Goldman has not determined an identity for Marcus. It's been cast both as a busy Silicon Valley startup, where coders sip kombucha from a tap at a WeWork office in San Francisco, and as a nostalgic throwback, the logo is a simple M on the type of wooden sign that can swing from a small -Great country trade.
Our Goldman poll asked customers to imagine Marcus as a party guest. Is he a spunky teenager or a chill boomer? Is he driving a minibus or hybrid? Does he stand alone at the snack table or DJ'ing? Is he playful, hardworking, cultured or cool?
Users earned Amazon gift cards for feedback.
Even Marcus' products do not fit easily. It provides personal loans to consumers who have money that needs money to finance home renovations or pay down other debt. High-yield savings accounts are marketed to wealthy individuals with cash around them. Marcus is looking for tech-savvy consumers, but doesn't have a smartphone app.
Meshing Goldman's buttoned-up culture with an influx of new talent has also been a challenge, executives say. Marcus has hired around 500 people from rival consumer banks and a further 500 from technology companies, according to a spokesman.
Marcus bought four tech startups including Clarity Money, a personal finance app whose founder,
zipped around Goldman's headquarters on a hoverboard until it was confiscated by legal personnel after someone crashed it, said people familiar with the matter.
Marketing professionals, sourced from companies including PepsiCo and
, pimping away jingles that were broadcast on sports radio this fall. ("I feel like a smart money guy," clutches a middle-aged man, "now that my savings price is high.")
As Marcus goes toward his third birthday, turnover has spiked – some of that welcome by senior executives , who say they have learned more about what it takes to run a consumer business. Marcus has had three product heads in three years. The most important risk officer went to
the chief of operations who walked the Utah call center floor in cowboy boots left earlier this year.
As Marcus becomes more central to Goldman's future, leaders have discussed phasing out his name, people say. Goldman is already killing other brands it has acquired during its push on Main Street, including wealth manager United Capital and the 401 (k) startup Honest Dollar, whose logos of cornflower gold Goldman spent months perfecting.
Mr. According to people familiar with the matter, Solomon favors a simple brand on the company's consumer products: Goldman Sachs.
Write to Liz Hoffman at firstname.lastname@example.org and Peter Rudegeair at Peter.Rudegeair@wsj.com
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