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Goldman Sachs to woo more mid-sized corporate clients

Goldman Sachs Group’s chief executive officer David Solomon has confirmed that the US investment bank aims to boost the number of mid-size corporate clients it serves over the next few years.

The news follows last month’s report by Euromoney’s Report Cards that Goldman is on course to roll out cash management services later this year or in 2020.

A separate Reuters report stated the bank will leverage its existing foreign exchange business to start offering corporate clients a greater return on deposits if they sign up for its cash management services.

Solomon noted that Goldman’s investment bankers and corporate banking divisions have long managed relationships with some of the world's largest companies. But as the bank develops more corporate services, such as cash management, it aims to sell them to a broader group of clients.

“There are lots and lots of companies with (enterprise) value at $500 million to $3 billion,” Solomon said at a conference hosted by Credit Suisse Group AG in Florida. "There's real ... expansion opportunity for the firm ... to open the aperture of corporations that we bring Goldman Sachs to.”

The bank started work last year in developing a technology platform to handle corporate clients’ cash payments and receipts of money around the world. Goldman Sachs will launch the product in 2020 and become its own first client by moving the bank’s own deposits from others onto the new cash management platform.

Growth targets

Solomon became CEO of Goldman last October and has overseen a review of the bank’s businesses to identify areas where it can grow to reach a goal of generating $5 billion in new revenue by 2022.

He says that Goldman’s scale as a global bank means that strategies such as adding more small and mid-sized corporate clients or launching corporate cash management services can add “a couple of million dollars of revenue” at only a moderate cost to the bank. “You can move the needle over a period of time with reasonable investments.”

Cash management has traditionally been dominated by the top tier commercial banks, which has been regarded as a barrier to entry for Goldman Sachs. Many corporate clients are opting to consolidate their bank partners and are expected to remain with their relationship banks.

However, the evolving cash management landscape coupled with Goldman Sachs’ own track record and willingness to invest mean that it should be able to gain market share.

In addition, the bank has developed a captive audience of high net worth clients thanks to its consumer banking business, Marcus, which launched in the US in 2016 and in the UK last September. Offering competitive deposit rates, Marcus had signed up 100,000 UK customers in its first month of operation and has accumulated more than $7 billion in deposits.

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