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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 trading.
Net 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 Street financial institution has been hit onerous by the extended weak point in funding banking and trading, its historic revenue engines. Investment banking revenues tumbled 20 per cent to $1.4bn whereas revenues from trading equities, fastened revenue, currencies and commodities fell 12 per cent to $5.7bn.
An already testing quarter was additionally marred by a number of costs, together with a $504mn writedown on GreenSky, a web-based lender acquired in 2021 as a part of chief government David Solomon’s ill-fated push into shopper banking. Goldman additionally recorded a $485mn impairment on its actual property investments.
While the financial institution’s $1.1bn in revenue for the quarter matched analysts’ expectations, the hunch in earnings highlights the strain going through Solomon, who’s mired in probably the most difficult interval of a tenure that started in 2018.
Last yr, Solomon pivoted away from the group’s much-heralded growth into shopper banking, re-emphasising Goldman’s funding banking and trading companies simply as each face the hardest circumstances in a number of years.
“I remain fully confident that continued execution will enable us to deliver on our through-the-cycle return targets and create significant value 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. Investment banking revenues, in the meantime, had been flat at shut rival Morgan Stanley and up 7 per cent at Bank of America. They fell 30 per cent at Citigroup.
Trading revenues are nonetheless above pre-pandemic ranges however the enterprise is coming off a increase on account of unstable monetary markets in the course of the pandemic, central banks elevating rates of interest and Russia’s warfare with Ukraine.
Within Goldman’s trading division, revenues from equities edged up 1 per cent to nearly $3bn, surpassing estimates of $2.4bn. That helped drive whole 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 had been hit by the impairments tied to actual property investments.
Goldman’s return on fairness, a essential measure of profitability, was 4 per cent for the quarter, nicely under friends and far 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 trading in New York. Analysts had been unusually divided over how dangerous the quarter could be for the financial institution.
Additional reporting by Stephen Gandel
This article has been amended to make clear that Goldman’s second-quarter profits are the bottom since 2020.