Stand by for giddy new heights of status-driven banking. Instead of pulling out any old card at the golf club bar, executives seeking to impress will throw down a Goldman Sachs platinum card. The former investment bank is considering branching out into online banking for the masses, even if deposit-gathering, through savings products, is likely to trump credit cards in the list of its new e-businesses.
Still e-banking can be a grubby affair. Icesave, the Icelandic product flogged to UK savers, and toppy rates on fixed-term deposits from ailing institutions, have tarnished the sheen of attractive online offers. It seems unlikely that Goldman – which in fact already offers fixed-term deposits through its Utah bank subsidiary – wants to wade deep into the fray.
An online bank would, at best, provide a low-cost way of adding to Goldman’s $20bn of bank deposits, some held in its Irish subsidiary. It avoids the expense (and management hassle) that would be required if the bank were to buy up branches round the country – a strategy Goldman, through seeking only a New York state banking licence, has signalled it is unlikely to pursue. The amounts of deposits on offer are also moderate. ING Direct, the largest US online-only bank, has garnered only about $70bn in deposits, having launched in 2000. This compares with the largest US banks with some $700bn. That it ranks 17th biggest in terms of online bank accounts overall suggests some tech-savvy savers still prefer a bank with bricks and mortar.
Goldman’s challenge is to maintain profitability while squeezing its leverage ratios to levels acceptable for a bog-standard bank. That backdrop is hardly a great advertisement for retail savers. Goldman – which has emphasised that a small part of its business could be funded through bank deposits – would doubtless prefer to stick to what it does best. Social climbers may be disappointed.
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