Goldman Sachs is poised to enter the Swiss mortgage market this year, finews.com can reveal. Will it steamroll the market when it decides to enter?
The Swiss market has puzzled over Goldman Sachs' lending plans in Switzerland for months: the New York-based investment bank was reportedly close to entering the fiercely competitive Swiss mortgage lending market last autumn.
Since then, mortgage market observers have speculated that Goldman is backing away from plans. In fact, they are still on, a person familiar with the matter told finews.com: Goldman executives in Switzerland have spoken to Swiss financial regulator Finma ahead of a plan to ramp up its mortgage business later this year.
Regulatory Hurdle
A spokeswoman for the bank declined to comment. She referred to previous statements that Goldman has previously said it could tap mortgage lending in other European markets after beginning in the Netherlands in 2015.
The parallel to the Netherlands shows that Goldman Sachs has no intention of directly competing with retail lenders like Raiffeisen, nor sponsor borrowers who can't shoulder a home loan. Instead, the U.S. bank – active in wealth management and investment banking in Switzerland – could partner with platforms which sell mortgages.
Packaging Home Loans
In the Netherlands, these mortgages are granted only to solvent clients with a low likelihood of default. That's where the U.S. bank comes in, putting up financing for loans, which are in turn securitized and can be sold to institutional investors as residential mortgage-backed securities.
A loosening of the Dutch mortgage market has provided a fillip for this business model, offering up a swath of mortgage platform as alternatives to traditional banks. Financing is similarly cheap to Switzerland, and borrowers are solid – making the market attractive for foreign investors like Goldman.
Frothy Swiss Market
Specifically, the U.S. bank might adapt its offering in the Netherlands to the Swiss market. This is a welcome development for domestic providers, simply because Goldman's muscle will hike liquidity in the mortgage market.
To be sure, Goldman is poised to shovel more credit volume in Switzerland's already frothy property market. Also, the bank is ultimately selling a retail-based product, which will lift its potential exposure to reputational risks. In Holland, Goldman is a niche player in the mortgage market – tempering expectations that it will steamroll the Swiss market when it decides to enter.
