CEO David Solomon, Goldman Sachs, during a Bloomberg television show at the Goldman Sachs Financial Services Conference in New York on December 6, 2022.
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Goldman Sachs on Wednesday aware earnings below analysts’ expectations amid writedowns tied to commercial real estate and the sale of its GreenSky lending unit.
This is what the company reported:
- Earnings: $3.08 per share vs. $3.18 per share Refinitiv Estimate
- Revenue: $10.9 billion, vs. an estimate of $10.84 billion
second quarter profit fell 58% to $1.22 billion, or $3.08 per share, due to sharp declines in commercial and investment banking and losses related to GreenSky and real estate investments, which sapped about $3.95 of earnings per share. Companywide revenue fell 8% to $10.9 billion.
The company disclosed a $504 million impairment linked to GreenSky and $485 million in real estate write-downs. Those charges flowed through its operating expense line, which grew 12% to $8.54 billion.
Goldman CEO David Solomon faces a difficult environment for his most important businesses as a slump in investment banking and trading activity drags on. On top of that, Goldman had warned investors of commercial real estate writedowns and impairments linked to its planned sale of fintech unit GreenSky.
Unlike its more diversified rivals, Goldman earns most of its income from volatile Wall Street activities, including trading and investment banking. That can lead to outsized returns during boom times and underperformance when markets don’t cooperate.
“This quarter reflects the continued strategic execution of our objectives,” Solomon said in the earnings release. “I remain fully confident that continued execution will allow us to meet our performance targets throughout the cycle and create significant shareholder value.”
The bank earned a paltry 4.4% return on average tangible common equity in the quarter, a key performance metric. That is well below both its own goal of at least 15% and the results of competitors, including JPMorgan Chase and Morgan Stanley.
Goldman has said trading revenue was headed for a 25% decline in the quarter. Investment banking has been weak on subdued issuance and IPOs amid interest rate hikes from the Federal Reserve. but rival JPMorgan Chase posted better-than-expected business and banking results last week, saying activity improved late in the quarter, so Goldman may well beat its guidance.
Analysts are likely to ask Solomon about plans to continue winding down from its ill-fated push into consumer banking. Goldman has reportedly been in talks to sell its Apple Card business to amexpressbut it is not clear how far those talks have progressed.
Goldman shares have fallen nearly 2% this year, compared with the KBW Bank Index’s roughly 18% drop.
On Friday, JPMorgan, Citigroup and fargo wells each posted earnings that beat analysts’ expectations amid higher interest rates. Tuesday, Bank of America and Morgan Stanley also reported results that exceeded forecasts.
This story is unfolding. Please check for updates.