GS Goldman Sachs Group Inc

By Liz Hoffman 

Goldman Sachs Group Inc. is quietly plotting a move into commercial banking, hiring a senior JPMorgan Chase & Co. engineer to build a suite of cash management tools, deposit accounts and other products for big companies, according to people familiar with the plans.

Hari Moorthy is joining as a partner from JPMorgan, where he was a managing director working on commercial-banking technology. He will be designing similar tools that Goldman could offer to corporate clients, as well as use to manage its own finances, according to the people.

It is a somewhat unorthodox move for Goldman, which is better known for its advice on mergers and capital raising. The business of helping companies manage and move their cash is generally the province of big commercial banks like JPMorgan and Citigroup Inc., which use giant balance sheets and global footprints to help companies manage their day-to-day finances.

Goldman's roots are as an investment bank, trading and underwriting securities and brokering deals. Investment banking is a game of risk-management and idea generation; commercial banking is more a logistics play and favors bigger balance-sheet institutions. (JPMorgan has $2.5 trillion in assets to Goldman's $917 billion.)

Goldman is branching out in search of growth. Its core trading operation has stumbled in recent years, and its capital-markets and merger business are fairly dominant already, meaning further growth will be hard-won.

In 2016, Goldman launched a consumer bank, taking deposits and making small loans online. Executives believe that retail business could generate $1 billion in annual revenue by 2020.

Adding a commercial-banking business could bring additional revenue and provide a new source of deposits. Goldman has been looking to diversify its funding sources since the 2008 crisis, when its reliance on overnight borrowing nearly proved fatal.

Still, it isn't clear how Goldman can compete against the entrenched giants. JPMorgan, Citigroup, Bank of America Corp., Wells Fargo & Co. and others have experience in the business and the infrastructure to zip cash around the world. They have big lending books that build loyalty among corporate treasurers, and armies of commercial bankers that call on them regularly.

About half of JPMorgan's $1.2 trillion in deposits are from corporate customers, according to regulatory filings. The firm made $4.1 billion in revenue from commercial loans last year and another $3.4 billion from cash management and treasury services.

Goldman's ambitions are modest for now, say people familiar with the firm's plans. It is looking to use technology, rather than physical branches, as the cornerstone of its offerings. It is also looking for ways to partner with third parties to provide some services, the people added.

Mr. Moorthy, who previously worked at Goldman from 2007 to 2014, will oversee a group of engineers designing new products, including a cash-management system and a dedicated corporate interest-bearing account, according to people familiar with the plans. He will be co-head of technology for Goldman Sachs Bank USA, alongside Boe Hartman.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

April 03, 2018 14:20 ET (18:20 GMT)

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