Strategy

Goldman Sachs Gets $16B in Deposits From GE Capital

The acquisition of GE's online banking unit gives Goldman a cheap source of funding as it becomes more of a universal bank.
Katie Kuehner-HebertAugust 14, 2015

Goldman Sachs Group has agreed to acquire an online banking unit from General Electric, assuming about $16 billion in retail deposits that give it access to a cheap source of funding.

Terms of the deal for roughly $8 billion in online deposit accounts and $8 billion in brokered certificates of deposit were not disclosed, but a person familiar with the matter told The Wall Street Journal that the price Goldman paid was immaterial to the firm.

“This transaction achieves greater funding diversification and strengthens the liquidity profile of GS Bank by providing an additional deposit gathering channel,” Goldman Sachs’ Treasurer Liz Beshel Robinson said in a news release.

Reuters said the move would give Goldman Sachs a more stable source of funding to help it better weather future crises.

“The deal is relatively small, giving Goldman Sachs $16 billion of deposits to help fund its $860 billion of assets,” Reuters wrote. “But it represents the latest step in a historic shift for Goldman, a standalone investment bank that has been forced by regulators to look more like a universal bank since the financial crisis.”

The WSJ noted that GE Capital’s online banking unit has no minimum for online savings accounts and roughly 140,000 retail customers—a departure for Goldman, which has historically catered to institutions and wealthy individuals. At the end of June, Goldman’s deposits stood at $89 billion.

GE, meanwhile, has been dismantling its financial services business as it returns to its industrial roots. Earlier this week, the company agreed to sell its healthcare lending unit and related loans to Capital One Financial Corp. for about $9 billion.

The Goldman deal will “facilitate our complete exit from U.S. banking operations, eliminate the exposure of the U.S. deposit-insurance safety net to GE Capital and thereby significantly reduce our regulatory footprint in the U.S.,” Keith Sherin, GE Capital’s CEO, said in a statement.