2023-07-19 16:53:26
The pressure on David Solomon, the CEO of the investment bank Goldman Sachs who took office in October 2018, is growing. The move away from parts of the consumer business and from risky fund investments, which he announced in February, will initially cost money, almost exactly one billion dollars. That amount pushes Goldman Sachs’ second-quarter 2023 net income, which the bank announced on Wednesday, down to $1.2 billion. That’s Goldman’s lowest quarterly net profit in nearly three years and the worst of any major US bank this quarter.
However, stock analysts had expected this beforehand. After all, the board of directors had agreed since February that the return to the core business – investment banking – would incur costs. In the fund business, Goldman wants to be more active for customers and collect fees, similar to investment banking, and not make as many own investments.
The reaction of the stock market
Goldman Sachs stock was down about 1 percent in early trading Wednesday, maintaining a large chunk of the day’s gains. However, the stock did not follow the Dow Jones’ rally, which hit its highest point since December on Wednesday. In fact, Goldman’s share price has fallen about 15 percent over the period. Although the quarterly dividend will be increased by 10 percent, the return on equity of little more than 4 percent in the second quarter of 2022 is disappointing. In the second quarter of 2022, Goldman Sachs had net earnings of $2.8 billion.
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For detailed view
In addition to extraordinary write-downs on an on-book real estate portfolio ($485 million) and on online consumer finance company Green Sky ($504 million), which was only acquired in 2021 but is now for sale, Goldman Sachs is also suffering from the difficult ones Conditions in the capital market business. Solomon said the bank has maintained its place as the first advisor on corporate acquisitions and acquisitions, but investment banking fees fell 20 percent from the year-ago quarter. That’s a sharper drop than competitor JP Morgan; Bank of America was even able to increase its fees. While Goldman’s equity raising fees rose slightly, its fixed income, currency and commodities (FICC) revenue fell a whopping 26 percent to $2.7 billion. Goldman’s total earnings shrank 8 percent to $10.9 billion.
Hanno Mußler Published/Updated: , Recommendations: 8 Hanno Mußler Published/Updated: , Recommendations: 28 Hanno Mußler Published/Updated: , Recommendations: 50
The decline in FICC business is particularly noteworthy from a German perspective because it is of similar importance to Deutsche Bank as it is to Goldman Sachs Deutsche Bank is of rather minor importance. Deutsche Bank will present its quarterly figures on July 26th.
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