You’d better get ready, Goldman Sachs may be coming to your town.   The American multinational powerhouse founded in 1869 and known for financial services such as investment banking appears to be setting its sights on lending to consumers and small businesses.  Because the firm’s customers have traditionally been big companies and ultra-rich individuals, such a move into small loans would seem puzzling at first.  However, the numbers tell the story:  while Goldman’s return on equity may have dropped almost into the single digits, the return on equity for consumer loans can easily be twice that much or more.

Although Goldman will be making small unsecured online loans, it will nevertheless focus on borrowers with good credit.  The firm is unlikely to venture in vehicle loans because of recent negative publicity affecting such lenders from investigations by regulators such as the CFPB (see this recent GoodCredit.com story for details).  Deposits held by Goldman’s banking division have more than doubled in the last six years, providing greatly increased opportunity for funding personal and small business loans.  By concentrating on online lending, the firm can achieve significantly higher investment returns than if it had to build or acquire physical bank branches such as those of large banks like Bank of America or Wells Fargo.

Goldman has appointed a former credit card company executive to be in charge of its consumer and small business lending but has not disclosed a time frame for implementing this new line of business.  Goldman will also have to overcome with potential borrowers some of the bad press the firm generated from its role in the financial crisis of a few years ago.