Goldman Sachs to double lending to ultra-wealthy clients

Goldman Sachs plans to increase its lending to ultra-wealthy private bank clients significantly over the next five years, aiming to double its loans to individuals with account sizes exceeding $10 million.

Nishi Somaiya, the bank’s global head of private banking, lending, and deposits, revealed these expansion plans, emphasising a strategic focus on lending for high-value purchases such as luxury homes and sports teams.

In the first quarter, Goldman’s private bank reported $33 billion in outstanding loans, a figure that doesn’t account for other undisclosed commitments.

The bank’s total deposits soared to $441 billion, with over 39 per cent sourced from consumer accounts, a substantial increase from $190 billion at the end of 2019. This surge in deposits has enabled Goldman to finance more loans across its markets division, particularly for trading and private equity clients.

Goldman’s current lending in wealth management represents just 3 per cent of its client assets, far below the industry average of 9 per cent. In contrast, Bank of America and JPMorgan Chase report approximately $220 billion in outstanding loans to wealth management clients.

Goldman is looking to close this gap by targeting ultra-high net worth individuals and private equity firms, with the intention of enhancing client relationships and increasing revenue.

The bank also aims to boost the return on equity for its asset and wealth management division from the current 9.9 per cent to a mid-teens percentage.

Additionally, Goldman Sachs Asset Management is working towards doubling its private credit portfolio to $300 billion within five years, leveraging external investor funds.

This lending expansion is seen as a strategic effort to broaden Goldman’s services to ultra-wealthy clients who typically have a net worth of at least $30 million, offering them loans against illiquid assets such as real estate, alternative investments, or art.

Attribution: Reuters.