Goldman Sachs CEO David Solomon said he’s not concerned about Apple’s new savings account overshadowing his bank’s own Marcus savings accounts, though he’s watching closely for “cannibalization.”
Apple’s new savings account is administered via the Wallet app on iPhone devices but Goldman Sachs is the company’s financial partner.
“The yield on that is pretty close to Marcus, a little above,” a reporter said during the call with Solomon. “How should we think about the economics of that Apple relationship and the deposits specifically? And then how do you manage potential risk for cannibalization with your own Marcus offering?”
Solomon replied by saying that his company’s partnership with Apple unlocks “another deposit channel” for Goldman at a time when banks face pressure to attract deposits after a year of steady outflows.
“This is a way for us to try to open up another deposit channel and it’s always good for us to broaden our deposit base,” Solomon said.
“We’ve obviously looked very closely at the overlap between who holds credit cards and who holds—who has a Marcus deposit and that overlap is small,” he continued. “But we'll obviously watch closely to see whether or not there is any cannibalization.”
Deposit Outflow
The launch of Apple’s savings account comes as more established banks face growing pressure to lure depositors by offering higher savings rates and so keep depositors from transferring cash to higher-yielding products like money market funds.Customers of U.S. banks have withdrawn around $800 billion in deposits since the Federal Reserve began to raise interest rates in March 2022 in a bid to quell soaring inflation.
Deposit flight from banks accelerated in the wake of the March 10 collapse of Silicon Valley Bank (SVB), which triggered a crisis of confidence in the banking sector.
On March 8, there was $16.25 trillion in deposits in U.S. banks, Fed data show. By March 29, that figure had dropped steadily to $15.95 trillion, down around $297 billion.
That trend has since reversed. Between March 29 and April 5, the amount of deposits had grown by around $44 billion, to nearly $16 trillion.
But while the deposit outflow pressure has eased, some market watchers say that the banking crisis isn’t yet over.
Buffet Bets $1 Million Depositors Won’t Lose Any Money in US Banks
On the earnings call, Dimon also commented on Warren Buffett’s recent $1 million bet that depositors won’t lose any money even if their bank collapses.The JPMorgan chief said that Buffett’s wager should be seen as a reassuring sign that federal deposit insurance will work as it’s meant to.
“Warren Buffett was on TV talking about that he would bet $1 million … that no depositor will lose money in America,” Dimon said of the wager announced recently by Buffett, whom he called a “very bright man.”
So while the crisis isn’t over yet, Dimon said, it eventually “will pass.”
Buffett, like Dimon, predicted in a recent interview on CNBC’s “Squawk Box” that “we’re not through with bank failures” yet.
At the same time, Buffett says he’s confident that deposit guarantees by the Federal Deposit Insurance Corporation (FDIC) will, as they have in the past, protect insured depositors from losing their money in case of future bank failures.
“Banks can go bust, but depositors aren’t going to be hurt,” Buffett said, adding that he’s so confident that no insured deposits will be lost in U.S. banks that he’s willing to bet a $1 million on that outcome.
“You’re saying that you’ll put up $1 million against anybody who’s willing to take the other side of the bet that no depositor in a U.S. bank will lose money in the next year?” the interviewer asked Buffett.
Buffet confirmed the terms of the wager: “A year from now, whichever one of us has won gets to decide what charity the $2 million goes to,” he said.
The FDIC was created after some 2,000 banks failed during the Great Depression, with the aim of protecting people from losing their savings in bank failures and to restore confidence in the U.S. financial sector.
