Goldman Sachs to buy GE Capital's U.S. online deposits

Thu Aug 13, 2015 7:56pm EDT
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By Olivia Oran and Neha Dimri

(Reuters) - Goldman Sachs Group Inc (GS.N: Quote) is buying GE Capital Bank's U.S. online deposits, a move that will give the largest U.S. investment bank a more stable source of funding to help it better weather future crises.

The deal is relatively small, giving Goldman Sachs $16 billion of deposits to help fund its $860 billion of assets. But it represents the latest step in a historic shift for Goldman, a standalone investment bank that has been forced by regulators to look more like a universal bank since the financial crisis.

Lehman Brothers and Bear Stearns faltered in 2008 after they could no longer borrow from bond investors and in other markets. Regulators have been pushing investment banks since then to mimic commercial and universal banks and fund more of their assets with deposits from consumers. In times of stress, deposits are less likely to disappear because they are federally insured.

Some officials at the Federal Reserve, for example, pressured Goldman Sachs to acquire retail bank Wachovia soon after Lehman's collapse.

Goldman Sachs considered buying online bank ING Direct, but Capital One Financial Corp (COF.N: Quote) bought it instead in 2011, according to a person familiar with the bank's plans.

At the end of June, Goldman's deposits stood at $89 billion. Terms for the deal were not disclosed.

The bank long avoided targeting consumers as customers, but has lately been rethinking that position. It is starting up a new online consumer lending business, and hired Discover Financial Services (DFS.N: Quote) executive Harit Talwar to help develop it. People close to the bank said its decision to buy the GE Deposits was independent to its consumer lending business.

For General Electric Co (GE.N: Quote) the deal comes days after it agreed to sell its health care finance business to Capital One.   Continued...

A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012.  REUTERS/Brendan McDermid