GS Bank - the New Internet Bank from Goldman Sachs

Goldman Sachs Bank USA has completed the acquisition of the internet bank portion of GE Capital Bank. Goldman Sachs announced the news in this press release on Monday. For online bank savers, GE Capital Bank is now GS Bank, the brand name of Goldman Sachs Bank USA.

For depositors of GE Capital Bank, few things have changed. The internet bank website is now located at gsbank.com. The product offering is the same: an online savings account and CDs with terms from 6 months to 6 years. The rates are also the same. The savings account rate remains very competitive (1.05% APY). The CD rates are not quite as competitive. The 5-year CD is probably the most competitive (2.00% APY). I asked a GS Bank rep if they were planning any deposit specials to promote the new bank. According to the rep, they don’t know of any.

For new customers, there is one important change. GS Bank now limits balances to a maximum of $250K for individuals and a maximum of $500K for joint accounts. Accounts that were opened under GE Capital Bank have a much higher limit ($1 million per account and $3 million total for all accounts). According to this NY Post article, Goldman’s treasurer, Robin Vince, said that they want to bring in money from mom-and-pop savers because it "increases the funding diversification." They already have a lot of money from the big savers: there’s a $10 million minimum for its private banking clients.

It has been awhile since I last review GE Capital Bank. So here’s a recap of the important features of the savings account and CDs under GS Bank. Please refer to GS Bank’s FAQs and Deposit Account Agreement for more details:

GS Bank’s Online Savings Account Features

• No minimum deposit
• Maximum balance of $250K for individuals (new customers)
• Rate applies to all balances of $1 or more (currently 1.05% APY)
• Free ACH Transfer service
• Allows links to up to 4 external accounts
• Maximum outgoing transfer is $125K per transaction if done online (no limit if done by phone)
• No incoming transfer limit (as long as the maximum balance limit is maintained)
• ACH Transfers out take 1 to 3 business days

GS Bank’s CD Features

• Early withdrawal penalty: for a term of 12 months to 5 years, the penalty will be an amount equal to 270 days simple interest
• Minimum deposit is $500
• 10-day grace period at maturity
• 10-day CD Rate Guarantee ensures you get the highest interest rate we offer during the ten-day period starting on the day you open your Account, provided you fund your CD during this 10-day period.
• Accounts can be funded by ACH, wire transfer or check
• Monthly interest disbursements are allowed to your GS Bank savings account or to one of your linked external bank accounts

GS Bank Account Features Applicable to Both Savings Accounts and CDs

• There are no transaction fees for GS Bank accounts.
• You may add up to six beneficiaries to each account.
• A beneficiary must be an individual; you may not name a trust or other entity as a beneficiary
• Social security numbers for beneficiaries required
• Trust accounts are not offered
• No charge for sending or receiving wire transfers

My Take

Goldman Sachs didn’t come out of the 2008-2009 financial crisis with a rosy reputation. There were allegations that it profited from the collapse of the mortgage market. Just to point out some of the bad publicity it received after the financial crisis, it was sued by the SEC and it received over $10 billion of TARP money (It settled the lawsuit with an agreement to pay $550 million, and it has paid back the TARP money.)

This reputation may be one reason they’re branding their internet bank as GS Bank. It’ll be interesting to see how their reputation will affect customer acquisition. If we’re lucky, it will push GS Bank to offer higher deposit rates. Higher deposit rates may help people overlook their history.

Financial Overview

According to December 2015 call reports, GE Capital Bank had deposits of $16.7 billion and assets of $21.1 billion. Goldman Sachs Bank had deposits of $88.1 billion and assets of $134.7 billion. That’s only a small part of the total assets of the Goldman Sachs corporation. According to this Federal Reserve report, Goldman Sachs has consolidated assets of about $859.9 billion.

Below is a breakdown of the deposits from both banks as of December 2015. This provides insights about what we can expect from GS Bank:

GE Capital Bank

• Total deposits: $16.7 billion
• Total in savings and MM accounts: $7.4 billion
• Total in CDs: $9.4 billion
• Total in brokered deposits: $7.9 billion

Goldman Sachs Bank

• Total deposits: $88.1 billion
• Total in savings and MM accounts: $49.9 billion
• Total in CDs: $36.1 billion
• Total in brokered deposits: $49.6 billion

As you can see above, both banks have been heavily dependent on brokered deposits. Often, both GE Capital Bank and Goldman Sachs Bank had the best rates on brokered CDs. If they’re hoping to diversify their deposits, GS Bank may heavily push their online savings account and CDs to the average Joe, and that may mean a long future of competitive rates.