GS Goldman Sachs Group Inc

By Liz Hoffman and Telis Demos 

Goldman Sachs Group Inc.'s long-awaited lending platform is coming into focus.

The head of Goldman's new consumer-banking push, Stephen Scherr, spoke publicly about the firm's online-lending effort for the first time Tuesday, offering a few new details about the Wall Street titan's push onto Main Street. The bank has been taking consumer deposits online since the spring and plans a new lending platform, dubbed Marcus, to go live as early as next month.

Mr. Scherr, speaking at a New York financial conference, said unsecured loans are an underserved part of the market where Goldman can carve out a niche between big bank rivals and small fintech upstarts.

The giants -- Wells Fargo, J.P. Morgan Chase & Co., and Bank of America Corp. -- largely rely on credit cards, a big moneymaker they won't want to cannibalize by offering a competing lending product.

Meanwhile, Mr. Scherr said, online lending startups have to worry about securing funding for loans, or packaging their loans according to specifications that would make them easier to sell.

As a large bank in its own right, Goldman doesn't have similar concerns. That gives it the flexibility to underwrite more creatively, Mr. Scherr said, letting borrowers pick from a range of sizes, terms and payment schedules for their loans.

Such flexibility "pivots off the ability to fund off our own balance sheet," he said. Marcus loans aren't "tailored or conforming to a marketplace to syndicate or sell the exposure."

Goldman thought about buying a lending platform, but was deterred in part by high valuations, Mr. Scherr said. It also wanted a "clean sheet of paper" to better meet the expectations of regulators and consumers. "For us, at the end of the day, it made sense to build this," he said.

One part of the online lending formula Goldman won't look to reinvent is how to find borrowers. Mr. Scherr said the bank would use a combination of mailings, partnerships and online channels to find people who want loans.

"You'll see us with a conventional setup for customer acquisition," he said.

On the deposit side, Mr. Scherr said the bank has added $3 billion to the $8 billion in conventional retail deposits it bought from General Electric Co. in April, a faster growth rate than the portfolio enjoyed under the GE banner.

Mr. Scherr said that while the deposit-taking and lending pushes are happening at the same time -- and both bring Goldman into the market for regular folks' banking business -- they were born of different rationale inside the firm.

About two years ago, a group of executives was tasked with finding ways to turn Goldman's new bank charter -- a designation it got from the Federal Reserve to protect itself during the financial crisis -- into a growth engine. That is what led to Marcus, the online-loan platform named after the firm's co-founder, Marcus Goldman.

The purchase of GE's deposits was more opportunistic. Goldman has long looked to diversify its funding sources and toyed around with various ways to grow deposits "but never fired the starting pistol," Mr. Scherr said. When GE announced it was getting out of finance, Goldman pounced on its deposit book.

Goldman doesn't plan to "cross-market" loans to its depositors, or savings accounts to its borrowers, Mr. Scherr said. That practice is under scrutiny amid the scandal at Wells Fargo & Co., where aggressive cross-selling quotas led employees to open fake accounts for unsuspecting customers.

"We've made no assumption about the intersection between one customer population and the other," Mr. Scherr said.

Write to Liz Hoffman at liz.hoffman@wsj.com and Telis Demos at telis.demos@wsj.com

(END) Dow Jones Newswires

September 27, 2016 19:06 ET (23:06 GMT)

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