Goldman earnings hit by buying and selling slowdown and retail banking retreat

Goldman Sachs has slumped to its lowest quarterly revenue in three years, as a expensive retreat from shopper banking deepened the ache of the industry-wide slowdown in offers and buying and selling.

Web revenue plunged by nearly two-thirds to $1.1bn within the second quarter, down from $2.8bn a yr earlier, Goldman stated on Wednesday.

The Wall Avenue financial institution has been hit laborious by the extended weak spot in funding banking and buying and selling, its historic revenue engines. Funding banking revenues tumbled 20 per cent to $1.4bn whereas revenues from buying and selling equities, fastened revenue, currencies and commodities fell 12 per cent to $5.7bn.

An already testing quarter was additionally marred by a number of fees, together with a $504mn writedown on GreenSky, a web based lender acquired in 2021 as a part of chief govt David Solomon’s ill-fated push into shopper banking. Goldman additionally recorded a $485mn impairment on its actual property investments.

Whereas the financial institution’s $1.1bn in revenue for the quarter matched analysts’ expectations, the hunch in earnings highlights the strain dealing with Solomon, who’s mired in probably the most difficult interval of a tenure that started in 2018.

Final yr, Solomon pivoted away from the group’s much-heralded enlargement into shopper banking, re-emphasising Goldman’s funding banking and buying and selling companies simply as each face the hardest situations in a number of years.

“I stay totally assured that continued execution will allow us to ship on our through-the-cycle return targets and create important worth for shareholders,” Solomon stated on Wednesday.

The drop in funding banking revenues matched analysts’ expectations however was steeper than the 5.6 per cent fall at JPMorgan. Funding banking revenues, in the meantime, have been flat at shut rival Morgan Stanley and up 7 per cent at Financial institution of America. They fell 30 per cent at Citigroup. 

Buying and selling revenues are nonetheless above pre-pandemic ranges however the enterprise is coming off a increase on account of risky monetary markets throughout the pandemic, central banks elevating rates of interest and Russia’s conflict with Ukraine. 

Inside Goldman’s buying and selling division, revenues from equities edged up 1 per cent to nearly $3bn, surpassing estimates of $2.4bn. That helped drive complete revenues for the quarter to $10.9bn, down 8 per cent from a yr earlier, however higher than anticipated.

Goldman’s fixed-income and commodities merchants fared much less nicely, with revenues falling 26 per cent to $2.7bn, trailing the $2.8bn analysts had pencilled in. 

Goldman’s asset and wealth administration division, the cornerstone of Solomon’s efforts to diversify Goldman’s enterprise, reported income of $3bn, down 4 per cent from the identical interval final yr and lagging analysts’ estimates of $3.5bn. Earnings have been hit by the impairments tied to actual property investments.

Goldman’s return on fairness, a important measure of profitability, was 4 per cent for the quarter, nicely beneath friends and much off the financial institution’s personal goal of 14-16 per cent.

The financial institution’s shares, which have fallen about 2 per cent this yr, edged down 1.5 per cent in pre-market buying and selling in New York. Analysts had been unusually divided over how dangerous the quarter can be for the financial institution.

Further reporting by Stephen Gandel

This text has been amended to make clear that Goldman’s second-quarter earnings are the bottom since 2020.