• The bank expects to add one million customers a year to its budding Marcus retail division through the acquisition of GreenSky, announced in September at a $2.2 billion price tag, Goldman executives said in their first interview after the deal closed Tuesday.
• Goldman will start originating GreenSky's loans using its own $1.5 trillion balance sheet in the next few months, according to Bhatia, replacing the bank partners GreenSky had leaned on when it was independent.
• The integration of GreenSky systems into Goldman will take through the rest of the year and possibly into 2023, Goldman said.

Goldman Sachs, the 153-year old investment bank, is now officially in the home improvement loan business as it continues a push into the finances of ordinary Americans.

The bank expects to add one million customers a year to its budding Marcus retail division through the acquisition of GreenSky, announced in September at a $2.2 billion price tag, Goldman executives said in their first interview after the deal closed Tuesday. GreenSky is an Atlanta-based buy-now, pay-later fintech firm that focuses on construction loans with an average $10,000 size.

"It a great acquisition engine because we expect to bring a million new customers annually through this distribution we're adding to the Marcus ecosystem," said Swati Bhatia, a Goldman partner and former Stripe executive. These customers will be able to use the firm's Marcus app, where they will be offered the bank's other products, including savings, personal loans and an expected digital checking account later this year, she said.

The move has broad implications for Goldman investors as it ramps up its ambitions in consumer finance, bringing increased opportunities — and risk. Goldman will start originating GreenSky's loans using its own $1.5 trillion balance sheet in the next few months, according to Bhatia, replacing the bank partners GreenSky had leaned on when it was independent.

That will add potentially billions of dollars of new loans onto its balance sheet, which should serve as an engine for generating the type of interest income that powers larger retail rivals like JPMorgan Chase and Wells Fargo.

As a result, Goldman — which typically touts it ability to manage risk as it added products like the Apple Card to its portfolio — will be more exposed to the creditworthiness of ordinary Americans. While GreenSky naturally caters to homeowners, the loans are unsecured, meaning customers' houses aren't used as collateral if the borrower falls behind.

GreenSky had been originating roughly $7 billion in loans a year before it was acquired, although Goldman may choose to securitize some of the loans, depending on market conditions, Bhatia said.

Home improvement

Thanks to a shortage of new construction homes and remote-work trends accelerated by the coronavirus pandemic, demand for home improvement loans has been robust, according to GreenSky founder David Zalik, who is joining Goldman at the partner level.

"It's amazing how resilient that business is, even with a pandemic, with supply chain challenges, rising interest rates; the demand has been tremendous," Zalik said. "There was two months in the pandemic where we didn't grow, and then it went through the roof. People want to invest in their homes."

Customers typically come to GreenSky through the fintech's network of 10,000 merchants, which range from small businesses to some of the biggest U.S. home improvement brands. Users choose the length of repayment periods that may vary from 36 to 84 months and can repay loans early "at any time," according to Zalik.

"The consumer appreciates that if the total project is $15,000, I can buy it for $90 a month at a low single-digit interest rate," Zalik said. "It helps the consumer afford and manage their cash and helps the business sell their product, no different than Toyota sells a lot more cars because financing is available."

The integration of GreenSky systems into Goldman will take through the rest of the year and possibly into 2023, Bhatia said. With that, the bank will be closer to its vision as a provider of multiple digital products, both directly to consumers as well as via partners.

"Eventually as we complete the integration, we will be able to offer products across the spectrum to all of our customers," Bhatia said. "We are working on creating one seamless digital experience for our customers."