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Goldman Sachs Targets The Ultra-Rich 

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Goldman Sachs shifts its focus to private-wealth lending, targeting individuals and families averaging USD 60 million with the bank. 

Image Source: Smart Energy Decisions
Goldman Sachs shifts its focus to private-wealth lending, targeting individuals and families averaging USD 60 million with the bank. 
Image Source: Smart Energy Decisions 

Goldman Sachs is undergoing a strategic shift, redirecting its lending focus from Main Street consumers to wealthier clients, such as hedge funds and private equity. The bank is increasing loans to its private-wealth clients, individuals and families with an average of USD 60 million, aiming to diversify its revenue beyond dealmaking and trading. 

At the third quarter’s end, Goldman Sachs reported USD 327.5 billion in outstanding loans and lending commitments, excluding consumer-related transactions. This figure reflects a substantial increase of approximately one-third compared to the corresponding period in 2020. 

Although Goldman has faced setbacks in consumer lending, it is expected to highlight growth in nonconsumer lending in upcoming earnings reports. The move is not without risks, particularly with higher defaults, but the bank emphasizes that most lending is secured by borrowers’ investments. 

To fund this lending expansion, Goldman is tapping into savings account deposits, a remnant of its earlier consumer push. Despite potential risks, the bank is strategically increasing lending to the ultra-rich, offering a new kind of loan in its asset- and wealth-management division. These loans enable individuals to borrow funds against the value of their investments in specific private-equity, private-credit, and other illiquid funds. 

Goldman’s CEO, David Solomon, sees this shift as a crucial part of their strategy to enhance revenue within asset and wealth management, and is relying on it to emerge as a more substantial source of revenue and profit. 

Nishi Somaiya, the Global Head of Private Banking and Lending, emphasized the strategic significance of increasing lending to the ultrarich, stating, “This one is particularly strategic. It hits all the things that are really important to us.” 

Revenue from private banking and lending to affluent clients experienced a noteworthy 12% increase in the first nine months of the previous year compared to the same period in 2022. 

Within Goldman’s extensive trading business, equities financing revenue surpassed levels from the preceding three years during the first nine months of 2023. This boost was attributed to expanded lending activities and a favorable stock-market rally. A strategic reorganization in 2019, led by CEO David Solomon and President John Waldron, saw equities lending and trading moved to adjacent floors, encouraging cross-business collaboration among employees through incentives like bonuses. 

Goldman’s lending portfolio encompasses various types of loans under the umbrella term FICC financing. This includes capital-call loans, providing cash advances to private-equity and other investment firms for making investments while awaiting their investors’ commitments. 

The upheaval in regional banks during the banking crisis of the previous year created an opportunity for larger banks like Goldman to seize a greater market share. 

Goldman recently acquired USD 15 billion in capital-call commitments, including around USD 9 billion in outstanding loans, from Signature Bank, following regulators seizing the bank last year. The bank is actively increasing lending to private-equity firms that borrow against their investments. The demand for such loans has risen as private companies delay going public until valuations improve, and private-equity firms seek avenues to return cash to their investors. 

Despite Goldman’s shift away from direct consumer lending, the bank is extending credit lines to nonbank lenders specializing in loans used by consumers. In the past year, Goldman has increased financing to UWM Holdings, collaborating with mortgage brokers, and pursued a deal with Rocket Mortgage, two major players in the U.S. mortgage lending landscape. 

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