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Goldman (GS) to Expand Online Lending Platform's Offerings

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Per an article by Bloomberg, The Goldman Sachs Group GS is in talks to acquire a New York-based startup, Clarity Money. The bank plans to fuse the personal finance services that the startup offers with its digital consumer lending platform — Marcus by Goldman Sachs.

People familiar with the matter disclosed that no deal had been finalized so far. Also, there are possibilities of the deal coming to nothing.

This uncertainty is assumed to have provoked a negative reaction from investors as reflected by the 4.2% drop in Goldman Sachs’ share price last trading session.

Brief on the Two Digital Platforms

Launched in October 2016, Marcus by Goldman Sachs, has been delivering good results so far. The platform exceeded the bank’s expectation of lending about $2 billion in loans by year-end 2017.

Moreover, in a bid to expand its offerings, the company acquired Oakland, CA-based startup, Final, which helped in reducing fraud by offering customized credit card numbers. After introducing credit card offering feature, the online lending platform began to provide home improvement loans. 

The fintech startup, Clarity Money was founded by Adam Dell, the brother of Dell Inc. founder Michael Dell. The application helps draw attention to recurring charges and allows cancellation of unwanted bills.

Per the article, the startup which started about a year ago, has about 50 employees and more than 500,000 users.

Our Take

Goldman Sachs’ efforts to provide consumers with a cheaper personal finance option are encouraging. This step, a far cry from its traditional retail deposits and investment management services, is likely to bolster its financial health. Lately, weakness in trading activity has kept its revenues under pressure.

Also, these strategic investments might help the bank reach its $5 billion revenue target that was disclosed in September 2017, to be achieved by 2020.

Nevertheless, costs arising from brokerage and market development remain near to medium-term headwinds.

Shares of Goldman have gained 9.3% over the past six months, underperforming 15.3% rally for the industry it belongs to.

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks worth considering in the same space are Morgan Stanley (MS - Free Report) , Raymond James Financial RJF and The Charles Schwab Corp. SCHW. All these stocks carry a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Morgan Stanley has increased 6.6% for the current year, in the last 30 days. The company’s share price has increased 15.9% in the past year.

Raymond James has witnessed 1.6% upward earnings estimate revision for 2018, in the last 30 days. Its share price has risen 11.9% in the past year.

Charles Schwab’s shares have gained 22.5% in a year and its earnings estimates for 2018 have moved up 8.6% in the last 30 days.

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