NEW YORK - Goldman Sachs Group Inc. on Friday won a charter from New York State's banking department, a key step in the Wall Street bank's effort to change its investment banking model and gather deposits.
The new bank will be called Goldman Sachs Bank USA, and include Goldman Sachs Capital Markets LP, Goldman Sachs Credit Partners LP and Goldman Sachs Mortgage Co, the banking department said. Goldman will merge its Utah-based industrial loan company into its New York-chartered trust company. Goldman Sachs Bank will be based in New York City.
A Goldman spokeswoman declined to comment.
The approval came two months after the Federal Reserve designated Goldman and rival Morgan Stanley as bank holding companies. That change gives them access to more low-cost funding and the $700 billion federal bank bailout, but requires greater regulatory scrutiny and reduced risk.
In seeking a state charter, Goldman diverged from Morgan Stanley and other lenders that have sought national charters, which would make it easier to expand into many states. JPMorgan Chase & Co Citigroup Inc and Bank of America Corp also have national charters.
Goldman's pursuit of a state charter suggests the company will continue to focus on investment banking, trading and wealthier clients, and not soon build a nationwide retail banking business. Morgan Stanley, in contrast, has said it will pursue "opportunistic" bank acquisitions.
A state charter nevertheless permits Goldman to open branches in states with "reciprocal" agreements, an arrangement now spanning roughly 25 states. New York-chartered banks may also operate branches in neighboring Connecticut, New Jersey and Pennsylvania, while remaining subject to New York laws.
Other lenders with New York charters include Bank of New York Mellon Corp and M&T Bank Corp.
Goldman's decision to seek a state banking charter "reflects confidence in New York as a financial center and in its banking department as an effective regulator," State Banking Superintendent Richard Neiman said in a statement.
Goldman and Morgan Stanley changed their banking model following the collapses of Bear Stearns Cos and Lehman Brothers Holdings Inc and Merrill Lynch & Co's agreement to be acquired by Bank of America.
Many investors worried about the sustainability of the Wall Street banking model, especially if customers or trading partners were to flee to lenders with more stable funding.
Goldman in September won a $5 billion infusion from Warren Buffett's Berkshire Hathaway Inc., four days after Goldman obtained bank holding company status.
Shares of Goldman closed Friday up $2.49 at $78.99. They have fallen 63 percent this year.
(Reporting by Jonathan Stempel; editing by Carol Bishopric)
Copyright 2008, Reuters