Exclusive: Goldman team uses retail deposits for Wall Street-style profits

Tue Sep 13, 2016 1:06am EDT
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By Olivia Oran

NEW YORK (Reuters) - As Goldman Sachs Group Inc (GS.N: Quote) has built its U.S. consumer bank, it has established a team to put its deposits to work on Wall Street, a telling development about Goldman's ambitions for the retail bank.

Led by 40-year-old Goldman partner and credit trading veteran Gerald Ouderkirk, the team's job is to use consumer deposits and other types of funding for trades, investments and big loans to earn profits, people familiar with the matter told Reuters.

The existence of the team, which has not been previously reported, was set up in mid-2015 and is formally known as the institutional lending group. Lately, it has ramped up activities as Goldman Sachs looks to do more lending broadly.

Some Goldman executives bristle at the idea that Ouderkirk's team is similar to chief investment offices, or CIOs, at bigger banks such as JPMorgan Chase & Co (JPM.N: Quote) and Bank of America Corp (BAC.N: Quote), since Chief Financial Officer Harvey Schwartz and Treasurer Robin Vince still manage the bank's day-to-day liquidity, including how much capital Ouderkirk gets to work with.

Goldman spokesman Andrew Williams declined to comment or make Ouderkirk available for an interview.

Goldman became a bank holding company at the height of the financial crisis in 2008, as did rival Morgan Stanley (MS.N: Quote). Although Morgan Stanley started moving toward traditional lending activities after agreeing to acquire Smith Barney in 2009, Goldman's progress has taken longer.

For years, bank officials denied any intent to transform Goldman Sachs into the sort of bank that dealt with Main Street consumers. They argued Goldman's bank would only cater to the wealthy individuals and corporations that had long been its client base.

But management's thinking has evolved as regulators have pushed the industry to get back to the basics of banking, said the sources, who were not authorized to discuss strategy publicly. For Goldman, deposits also represent a more stable and stickier type of funding than other types of short-term debt it has relied on historically.   Continued...

A screen displays the ticker symbol and information for Goldman Sachs on the floor of the New York Stock Exchange (NYSE)  February 9, 2016. REUTERS/Brendan McDermid/File Photo