Goldman Sachs has hired a senior engineer at JPMorgan to develop cash management tools as it eyes an entrance into the commercial banking market.
The Wall Street Journal, citing people familiar with the plans, reported the senior engineer and JPMorgan partner Hari Moorthy was hired to develop cash management tools, account deposit tools and other financial products geared at large companies. At JPMorgan, Moorthy was focused on technology for the commercial banking market. At Goldman Sachs, he will be creating similar tools, noted the report.
For Goldman Sachs, the push into commercial banking is somewhat of a departure for the Wall Street firm. It is more known for advising on mergers and helping companies raise capital — helping businesses manage and move money is the domain of JPMorgan and Citigroup. But with a need to find new avenues of growth, Goldman Sachs is going into new markets. In addition to bringing a new source of revenue to Goldman Sachs, a move into commercial banking can give it a new source of deposits. Since the financial crisis of 2008, it has been looking for ways to diversify its funding sources, reported The Wall Street Journal. Its push into the market will be modest at the beginning, with Goldman focused more on technology than opening up branch offices. It also wants to partnerto offer some of the products.
Goldman Sachs will be facing tough competition in the commercial banking market where JPMorgan, Citigroup, Bank of America and Wells Fargo have been the leading players. They have the know-how and infrastructure to help businesses with theircash management. What’s more, the big lending books at the banks have built loyalty among the customers that seek their help on a regular basis. The paper noted that around half of JPMorgan's $1.2 trillion in deposits are from businesses. It made $4.1 billion in revenue from commercial loans in 2017 and $3.4 billion from cash management and treasury services, noted theWSJ.
FAQs
The move was in response to the dramatically changing landscape in markets and the investment banking industry brought about by the collapse of Lehman Brothers merely six days before and the ensuing global financial crisis.
Is Goldman Sachs a commercial bank or investment bank? ›
The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals.
What makes Goldman Sachs different to its competitors? ›
Unlike other investment banks, GS strategically positions itself as the “friend of corporations” and defends businesses against hostile actors. Corporate defense has historically been an integral part of the Goldman Sachs M&A franchise.
What is the difference between investment banking and commercial banking? ›
The difference between commercial banking vs. investment banking is that investment banks typically raise money by selling securities (like stocks and bonds). On the other hand, commercial banks use consumer deposits to fund loans and mortgages, and the interest on those loans becomes profit for the bank.
When did Goldman Sachs become a commercial bank? ›
On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies.
Why is a commercial bank different from an investment bank? ›
The critical difference between the two types of banks is who they provide services to. Commercial banks accept deposits, make loans, safeguard assets, and work with many small and medium-sized businesses and consumers. Investment banks provide services to large corporations and institutional investors.
Who is Goldman Sachs biggest competitor? ›
Goldman Sachs main competitors are BNP Paribas, Credit Suisse, and Deutsche Bank. Competitor Summary. See how Goldman Sachs compares to its main competitors: JPMorgan Chase & Co. has the most employees (255,351).
What are the big 4 investment banks? ›
What Are the Big 4 Investment Banks? The big four are JPMorgan, Goldman Sachs, Citigroup, and Morgan Stanley. Some other global giants are treading right on their heels, including Deutsche Bank, Barclays, Credit Suisse, and UBS. There are at least 100 highly-regarded global investment banks.
What is the difference between corporate and commercial banking? ›
The corporate banking division makes loans to corporations, while the commercial bank division makes loans to people and small businesses. The difference is that the loans that a corporate bank puts together are on a much larger scale.
Why JPMorgan is better than Goldman Sachs? ›
What Are the Main Differences Between JP Morgan and Goldman Sachs? Both banks generate a sizable portion of revenues from market-making. However, Goldman Sachs is more dependent on such business. JPMorgan's revenue streams are a bit more diversified.
Weaknesses of Goldman Sachs
High Employee Turnover Rate – Goldman Sachs has a higher turnover rate compared to its competitors, which means more employees are leaving their jobs and, as a result, more money is spent on training and development when employees leave and join.
What separates Goldman Sachs from other banks? ›
We differ from our banking and fintech competitors in three main areas: technology, trust and global consistency.
How are finance companies able to compete against commercial banks? ›
How are finance companies able to compete against commercial banks? A. Finance companies have a small advantage over commercial banks in monitoring the value of collateral, which gives them an advantage in consumer durables, inventories, and business equipment.
What are the four functions of a commercial bank? ›
Commercial banks have the primary functions of accepting customer deposits in the current account, savings, and fixed deposits, lending money as credit to borrowers who then pay with interest, and disbursing payments in the form of transactions and customer payments.
Why corporate banking over investment banking? ›
Investment bankers advise companies on mergers, acquisitions, and debt and equity issuances and earn high fees from one-off deals in the process. By contrast, you will not advise directly on mergers, acquisitions, or equity issuances in corporate banking, and the debt deals you do will be smaller, with lower fees.
What is the reason for commercial bank? ›
The main purpose of commercial banks is to provide financial services to the general public and also provide loan facilities to the business which helps in ensuring economic stability and growth of the economy. Therefore, we can say that credit creation is the most important purpose of commercial banks.
Why were commercial banks created? ›
Commercial banks, savings banks, insurance companies and other financial intermediaries helped to fuel growth by channeling wealth from savers to entrepreneurs. Those entrepreneurs used the loans to increase the profitability of their businesses and hence the efficiency of the overall economy.
Why were commercial banks and investment banks separated? ›
The Glass-Steagall Act of 1933 forced commercial banks to refrain from investment banking activities to protect depositors from potential losses through stock speculation. Glass-Steagall aimed to prevent a repeat of the 1929 stock market crash and the wave of commercial bank failures.
Why did Morgan Stanley become a bank holding company? ›
Federal Reserve agreed to allow Goldman Sachs and Morgan Stanley to become bank holding companies, giving them easier access to credit and help them survive the financial crisis.
