Goldman Sachs has expanded its online banking to Europe with the creation of a new online deposits business. The financial group seeks to take advantage of the European market because of their federal insurance backing and their reliability of funding in times of crisis compared to competitors.
According to the bank’s treasurer, Goldman Sachs has added “$5 billion of online deposits since it acquired General Electric Co’s online deposits business in 2016.” They’ve also attracted the interests of U.S. savers with the addition of 60,000 new customers since the acquisition. In total, Goldman Sachs has around $125.5 billion in deposits, which is surprisingly still a “small fraction of deposits at banks with large branch networks like JPMorgan Chase & Co.”
Goldman Sachs also recently told investors to not always expect the bank to exercise the call options that have been regularly featured in its bond issuance in the past year. Their reasoning is that the bank wants to “preserve the flexibility given by the call options.” Robin Vince commented on the topic when stating, “It is important to note that we will not call these notes in every instance, even if they lose their capital treatment and even if it is economic for the firm to do so.”
To put it into perspective, around 86% of Goldman’s bond issuance this year has incorporated at least one call option, per the presentation accompanying the call. Recently, banks have mostly moved towards a “fixed-to-floating” structure, which most investors find pleasant because of the ability to reduce the economic value of the call option.
Goldman Sachs earns tens of billions of dollars in revenue each year, and its new online banking promotion in Europe will seemingly add to its value with the anticipation of a good amount of European funds.