Last week, Goldman Sachs (NYSE:GS) shared their 3rd quarter earnings report. Buried within the report was an update on Marcus, the digital bank and online lender that recently crossed the Atlantic setting up a beachhead in Europe by opening up in the UK in late September.
Marcus has now evolved from a single product, consumer lender, to a multi-product platform. Today, it serves more than 2 million customers through their lending and savings products plus their personal financial management app.
Explosive Growth in UK Deposits
During the conference call reporting the financial results, Goldman Sachs stated that since launch, Marcus has received over $2 billion of UK based deposits – a pretty impressive growth curve. As of the day of the call, this encompassed more than 75,000 individual accounts in the UK (early on in the call the number was pegged at 55,000 accounts as of October 9th). These deposits were described as a very, very valuable channel for the bank.
Regarding consumer unsecured loans, Marcus holds over $4 billion in loans on their balance sheet at the end of the quarter. At the end of 2017, Marcus had originated approximately $2 billion on consumer loans (deposits were stated at over $5 billion).
Goldman noted they are “very aware” as to where they are in the credit cycle – alluding to the expectation of a slowing economy at some point in the future. Marcus expects that loan growth will be governed by their assessment of consumers ability to pay. The company said they have “honed their underwriting standards.” Goldman is confident they will see an increase in origination during 2019, in comparison to 2018 numbers, but the “debate is about the size and the pace of the increase.”
“We are building this business for the long run and we are not chasing volume targets. We will continue to grow deliberately and carefully.”
Marcus is an interesting, and important, Fintech play. Unencumbered by a legacy consumer banking business, and an antiquated tech system, Goldman moved to enter the digital banking sector. While initially commencing with consumer loans, Goldman is quickly becoming a full stack banking platform.
Goldman has already invested in Trussle, a UK Fintech in the mortgage sector. Management expects additional acquisitions in the consumer vertical. Expect a wealth management application soon. Goldman’s aspirations are clearly to become the digital bank of the future. Marcus is expected to enter the German market soon with other jurisdictions to follow.