Two years ago, Goldman Sachs (NYSE:GS) unveiled its Marcus consumer bank to much fanfare. Long known for serving wealthy clients and the largest enterprises, Goldman was actually coming out with a product for the masses. Even better, the Wall Street titan was starting from a blank piece of paper, without the burden of large physical bank branches, as rivals had. Despite a not-so-hot reputation coming out of the Great Recession, Marcus has managed to attract an impressive $26 billion in deposits in just two years.

That might have something to do with the high rates Goldman pays on savings accounts (1.9% as of this writing), but it's also a testament to Goldman's heft and marketing skill. In addition, new CEO David Solomon said last spring he sees Marcus turning into a "very big, very profitable" business in the future. Combine that with Goldman's valuation of only 8.8 times forward earnings, and one might think this is a pretty favorable investment setup.

However, I wouldn't invest in Goldman Sachs based on the Marcus initiative. Here's why.

A tablet displays a credit score of 811.

Image source: Getty Images.

We're late in the cycle...maybe

Remember that Goldman decided to start a lending operation eight years into a bull market, which has just turned 10. Marcus' product is also an unsecured personal loan, meaning that if a loan goes bad, there's no house, car, or stock portfolio to repossess.

That's part of the reason Marcus only has around $4 billion in loans outstanding -- much lower than its $26 billion in deposits. Bloomberg also recently reported that Goldman is considering moderating loan growth next year. A recent comment from the third-quarter conference call didn't exactly inspire confidence, either:

We ... remain very aware of where we are in the credit cycle. Our pace of loan growth will continue to be governed by our assessment of consumers' ability to pay and the overall macro environment. We are building this business for the long run and we are not chasing volume targets. We will continue to grow deliberately and carefully.

Management did claim that "we see no evidence that the cycle is turning," but maintaining it is merely being proactive. Still, could there be something else amiss?

Competitive threats

While Goldman is a hundred-plus year-old stalwart of Wall Street, consumer lending is still unfamiliar territory. Marcus is behind West Coast fintech companies like LendingClub (NYSE: LC), Prosper, and Social Finance, and other banks like Discover Financial Services (NYSE: DFS) in personal loans. Goldman had set an initial target of 4% loss rates on its loans, but then called for a range of 4% to 5% on its second-quarter call. One analyst from Craig-Halllum thinks loss rates are at the upper end of the range, higher than both LendingClub and Discover personal loans by about one percentage point.

That could mean underwriting isn't going as smoothly as anticipated, and might explain Goldman's decision to slow down. While the pause may be a good thing in the long run, it means investors will need to be patient. Management recently discussed other Marcus products including mortgages and auto loans, but these categories are also competitive, and it could signal that personal-loan growth is more difficult than first envisioned.

It's still tiny

Finally, while Marcus grabs a lot of media attention, it's pretty insignificant compared to Goldman's other divisions. Marcus is part of the company's investing and lending (I&L) segment, which provided 21% of overall revenue last quarter. But Marcus is only a fraction of that, as I&L also includes secured loans to middle-market companies, large enterprises, and infrastructure projects.

Assuming the average Marcus loan yields 12%, that would only equate to about $500 million annually on $4 billion in principal outstanding, or $125 million quarterly. For reference, the I&L segment earned revenue of $1.86 billion last quarter, and the company earned net revenue of $8.65 billion overall.

The majority of Goldman's business is still in two other segments: investment banking, and institutional client services (that is, trading). Investment banking was strong last quarter on the back of robust merger activity and the initial public offerings of several Chinese start-ups -- but that activity isn't dependable, especially if interest rates rise or if the equity markets decline, making it less attractive to go public. In addition, regulations and technological innovation have put pressure on the trading businesses in fixed income, currencies, and commodities; that division was down a whopping 30% in 2017 and fell 10% last quarter.

Goldman should get kudos for entering new markets and thinking longer-term. However, it will take a very long time for Marcus to make any sort of difference. With inconsistent divisions making up a majority of revenue, Goldman Sachs is not the screaming bargain it seems.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.