Goldman Sachs's second quarter was not a stellar one for investment banking – the traditional mainstay of the firm – and the firm might have raised eyebrows by its admission that its transaction backlog had fallen.
This being Goldman, however, there were reasonable explanations for everything. Sponsor financings were down across the industry, hurting debt capital markets (DCM), while recent big IPOs accounted for the backlog fall: in DCM and advisory it actually rose.
Understandably, therefore, the emphasis was more on the ways in which the firm is seeking to change its spots. It is continuing the shift in its funding from a reliance on wholesale markets to a more diversified range of sources, including consumer deposits. The firm reckons it can save $100 million in interest expense for every $10 billion it switches from wholesale to its retail bank Marcus.
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David Solomon |
In fact, despite its success in attracting deposits to its Marcus platform in the US and the UK, the firm is now consciously slowing lending growth as it prepares for the consumer credit exposure that it will gain through the launch of a credit card in partnership with Apple, expected in August.