Goldman Sold $1 Billion of Marcus Loans to Investment Firm Varde as Part of Exit

Investment firm Varde Partners snapped up about $1 billion of Marcus loans that Goldman Sachs Group Inc. has been offloading as it dissolves a once-celebrated effort to lend to Main Street.

(Bloomberg) — Investment firm Varde Partners snapped up about $1 billion of Marcus loans that Goldman Sachs Group Inc. has been offloading as it dissolves a once-celebrated effort to lend to Main Street.

Varde bought the personal loans at a discount to face value last month, according to people with knowledge of the transaction who asked not to be identified discussing private information. The loans in question were deemed to be performing — where borrowers are current on their payments — and their sale ensures Goldman has all but exited most of the loan book it originated directly for consumers. 

Representatives for Goldman and Varde declined to comment. The deal represents the most recent tranche of Marcus borrowings that Goldman has been offloading since earlier this year. 

The Marcus loans, along with Goldman’s popular high-yield savings accounts, were two of the most visible prongs of Goldman’s direct push to court Main Street. The firm suddenly found itself chasing after a different set of clients to pitch their products, from teachers and oil-patch workers to used-car salesmen — a very different endeavor for a company used to dealing with high-flying hedge funds and big corporations.

Read more: Goldman Sachs CEO Ditches Dream of Consumer Domination

But last year Goldman did a strategy about-turn. It set about ridding itself of much of that push, acknowledging its rapid and expensive foray into consumer banking didn’t go as planned. In April, the firm said it took a $470 million hit while offloading the initial chunk of Marcus loans and transferring the remainder to held-for-sale as it sought buyers. 

The bank was able to avoid a dent to its first-quarter earnings from that maneuver because the writedown was mostly offset by releasing reserves tied to those loans. 

When Goldman reports second-quarter results next week, it has said it expects to take a significant writedown on its installment-lending business GreenSky Inc., which it’s trying to offload just a year after closing the acquisition. 

Goldman’s high-yield savings account is one product that the bank still swears by, even as the other elements of its consumer push are being unraveled.

Read more: Goldman Breaks Own Rule to Flag Results Much Worse Than Rivals

Varde focuses on credit and has more than $12 billion in assets under management, according to its website. It’s one of a number of firms that has seized on the chance to buy consumer loans as funding them becomes harder and more expensive amid rising rates.

Alternative asset managers more broadly have been looking to increase exposure to consumer credit to diversify their portfolios away from corporate debt and to capitalize on retrenchment by banks. They can make juicy returns by purchasing the loans at a discount, and can opt to repackage them into bonds and sell them as asset-backed securities.

–With assistance from Carmen Arroyo.

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