Rosalind Evans
Goldman Sachs witnessed a significant decline in profit as the bank’s dealmaking and trading sectors, which form the backbone of its operations, experienced a slowdown. The financial behemoth also registered almost $1 billion depreciation in the worth of its consumer and real estate ventures.
According to the latest quarterly earnings report unveiled on Wednesday, Goldman Sachs saw a nearly 20% decrease in its investment banking revenue in the second quarter of 2023. The trading revenue similarly diminished by 14%. Consequently, the company’s profit slumped by 58% from the same period last year, landing at $1.2 billion.
Although Citigroup and Morgan Stanley reported similar profit declines, Goldman Sachs’s drop surpassed that of its counterparts.
According to FactSet data, the banking giant recorded earnings per share of $3.08 for the second quarter, falling short of the anticipated $3.16. Goldman Sachs is the sole large bank thus far that has underperformed in earnings per share estimates.
The financial institution reported its poorest quarterly profits since the beginning of 2020 amid the pandemic-triggered recession. This weak performance will likely heighten criticism towards CEO David Solomon, who has already been scrutinized for the bank’s diminishing consumer division.
CEO David Solomon, while addressing the quarterly earnings call on Wednesday morning, admitted that the results had been impacted by “the challenging macro environment” and particular issues faced by their unique blend of businesses. Solomon added that the activity level in many areas of investment banking remains at a nearly decade-long low, and clients have retained mainly a cautious approach throughout the quarter.
Solomon noted some positive signs emerging in the M&A sector despite the gloomy outlook. He optimistically stated that the current dip in investment banking activity at a 10-year low would not be the norm moving forward.
Solomon also mentioned that discontinuing the bank’s consumer lending sector would liberate capital and time to concentrate on areas central to the bank’s strategy. However, not all industry analysts agree with this viewpoint.
David Wagner, a portfolio manager at Aptus Capital Advisors, expressed dissatisfaction with the management’s performance and vision regarding Goldman Sachs’s consumer side on Wednesday. Wagner’s concerns about the company’s internal struggles have led him to speculate about potential employee retention issues in the future, as trust in CEO David Solomon could be at risk.
On the earnings call, 61 Solomon did not address any potential succession plans.
Goldman Sachs (GS) stocks experienced a dip in early trading but recovered from earlier losses, trading almost 0.9% higher following the call.
Despite the steep drop in profits, Goldman Sachs remains hopeful that emerging opportunities in the M&A sector, alongside strategic refocusing, will mitigate the current challenges. However, these developments occur under an increasingly critical gaze from industry analysts, investors, and staff, with CEO David Solomon’s strategy and leadership under the spotlight. As Goldman Sachs navigates the choppy waters of the present financial landscape, all eyes will be on its recovery path and tactics to bounce back from these unprecedented lows.
