Goldman Sachs is scaling back plans for Marcus, its consumer lending platform. The move is fueled by growing concerns about the consumer debt market, according to reports.
According to Bloomberg, Goldman has decided to scale back loan originations for 2019 for Marcus. No details were given on the new targets. Goldman Sachs has also declined to comment on the matter.
Marcus has become a pillar for the company’s plan to boost revenue over the next few years. The unit has grown very quickly, lending more than $4 billion in less than two years. Last year, the company said it sees a $1 billion revenue opportunity with its Marcus unit.
The growth of the company’s Marcus unit has raised questions from analysts about the credit quality of its loans, particularly because the bank said a large portion of its loan book is subprime.
In August, Robin Vince, Goldman’s chief risk officer, responded to these concerns during an investor call.
“Our growth at the Marcus loan portfolio will continue to be prudent and disciplined. We are lending to creditworthy customers with demonstrated ability to pay. The business is not under pressure to reach volume targets.”
The Marcus unit is a departure from Goldman Sach’s focus on investors and corporations through its trading business and investment bank.
Goldman Sachs launched Marcus in 2016 as part of the company’s effort to diversify its revenue sources and increase earnings. Trading revenue, once a lucrative unit of Goldman Sachs, has slowed.
Marcus acquired personal finance startup Clarity Money in April, which added over 1 million additional customers.
The firm also recently launched its savings account service in the UK, which offers an interest rate of 1.5% for one year. In just one week of launching the product, 50,000 customers have signed up for the retail product.
The firm’s 2019 plans are based on current market conditions for consumer lending, and there’s a chance that those plans may still change.
Goldman Sachs cut its loan targets at a time when there is increased concern of the potential for increased losses in consumer credit.
In the U.S., household debt has reached a high of $13.3 trillion in the second quarter of the year. Mortgage balances hit $9 trillion during that same period, according to the Federal Reserve Bank of New York.
Total U.S. consumer debt is on track to hit $4 trillion by the end of the year.
