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Goldman Sachs looks for good borrowers, depositors in the cracks of coronavirus

By Elizabeth Dilts Marshall

NEW YORK (Reuters) – Goldman Sachs Group Inc <GS.N> is forging new partnerships with customers who may be facing financial hardships during the coronavirus, counting on them to be good borrowers and depositors once the global recession recedes, the executive who manages its consumer bank told Reuters.

Goldman’s digital bank, known as Marcus, has in recent weeks hatched deals with AARP, a U.S. organization geared toward older, retired individuals, and with JetBlue Airways Corp <JBLU.O>, said Harit Talwar, head of consumer banking. Goldman plans to launch a checking account and wealth-management product later this year or early next year, he said.

“One of our big advantages is we are housed in Goldman Sachs and have relationships with some of the biggest companies in the world,” Talwar said.

He declined to name companies Goldman may partner with, but he said the bank is targeting companies it already works with to find consumers that are likely to have solid credit once global businesses get back to action.

Goldman’s consumer bank is small and only five years old, which is why it is looking for customers to grow deposits and loans through partnerships with companies, a strategy larger retail banks like JPMorgan Chase <JPM.N> and Bank of America <BAC.N> have used for decades.

The coronavirus has already infected 2,410,208 people around the globe and a deadly respiratory virus associated with it, called COVID-19, has killed 165,854. In response, governments ordered the closure of huge swaths of the global economy, putting many millions of people out of work, but there is now talk of re-opening major cities and businesses. https://reut.rs/2Kmkhxw

While it is still a tiny portion of Goldman’s overall revenue, the consumer bank is growing fast.

Consumer banking generated $864 million in revenue last year, roughly 2.4% of Goldman’s total revenue. That figure was $282 million, or 3.2%, at the end of the first quarter.

Despite the coronavirus’ effect on consumers’ finances, Marcus added $12 billion in deposits during the first three months of the year, arriving at $72 billion by March 31 and inching toward management’s goal of $125 billion by 2025.

Goldman’s Chief Executive David Solomon has encouraged bankers in all divisions to use conversations with corporate clients to open doors for their colleagues in divisions. When the bank helps arrange financing, investments or other services for a big organization, it can sometimes seal a partnership where that organization’s employees are offered a special deal for deposits or loans.

For instance, Goldman is giving discounts on personal loans and extra interest on savings products for AARP members, according to the group’s website. JetBlue is Goldman’s first partner for Marcus Pay, a new product where customers can pay off big purchases in installments over 12 or 18 months at a fixed rate of 10.99% to 25.99%, according to Goldman’s website.

Since the coronavirus took hold in the United States, where Goldman has centered its consumer banking efforts, roughly 22 million people there have pursued jobless claims. Aware that surging unemployment and business disruptions could hinder its Main Street banking ambitions, Goldman is also tightening standards for borrowers, Talwar said.

He would not give specifics about credit standards for customers, but in January the bank said the average FICO score across the consumer bank’s loan and credit cards is 740.

In the fourth quarter last year, banks tightened underwriting requirements on credit cards by the greatest amount since 2009, according to a survey of credit card customers conducted by Moody’s.

“We’ve always been prudent in our credit standards,” Talwar said.

(Reporting By Elizabeth Dilts Marshall, additional reporting by Anna Irrera and Imani Moise in New York; editing by Edward Tobin)

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