Goldman Sachs Group Inc.’s April-June second quarter saw its profits plummet, making it the worst profitable quarter under Chief Executive Officer David Solomon.
According to the financial results announcement on the 19th, April-June profit decreased by 58% from the same period last year due to the sluggish investment banking business, write-downs of real estate investments, and goodwill amortization of the consumer business that owns the green sky lending business. % profit decreased. Return on equity, a key measure of profitability, fell to 4%, the worst among the big U.S. banks.
David Solomon CEO
Source: Bloomberg
The company muted market expectations for its April-June results ahead of its earnings report, prompting analysts to cut earnings estimates for the quarter by almost half since mid-June.
Goldman Sachs hints at weak April-June earnings, prepares for market ahead of earnings results
Equity trading was a bright spot, with revenue of $3 billion, above the $2.47 billion forecast and outperforming its main rivals.
Asset and wealth management revenues were down 4% to $3.05 billion. Analysts had expected $3.5 billion. The division was impacted by its exposure to the real estate sector, recording write-downs on both its loan portfolio and equity investments, which reduced pre-tax income from principal investments by $1.15 billion.
Unlike many of its competitors, Goldman has aggressively used its own balance sheet to invest. The strategy could lead to volatile earnings, so Goldman is seeking to increase its reliance on fees earned by managing funds for other institutions.
Operating expenses also surged due to accounting for impairment losses associated with some consolidated real estate investments and amortization of goodwill. Impairments totaled approximately $1 billion.
The company is proceeding with the sale of its Green Sky business just over a year after completing its acquisition, a symbol of how management has dramatically backtracked from pursuing a retail banking strategy over the past year.
Other main items
Fixed income trading revenue fell 26% to $2.71 billion. Investment banking revenue of $1.43 billion, below the average analyst estimate of $1.51 billion, increased year-over-year while advisory fees plummeted.Bankers have warned that even if dealmaking picks up, pressure could continue this year due to the low number of mergers announced this year. List estimates $10.5 billion
Original title:Goldman Sachs Profit Tumbles on Real Estate Hits, Banking Slump(excerpt)
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2023-07-19 11:41:53
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