Goldman Sachs (GS) earnings 2Q 2023

Goldman Sachs Wednesday to publish The profit fell short of analysts’ expectations amid downgrades related to commercial real estate and the sale of GreenSky’s lending unit.

This is what the company reported:

• Earnings: $3.08 per share vs. $3.18 per share, estimated by Refinitiv
• Revenue: $10.9 billion, compared to an estimated $10.84 billion

second quarter profit He falls 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 legacy investments, which drained about $3.95 of earnings per share. Revenue fell 8% to $10.9 billion.

The company disclosed a $504 million impairment associated with GreenSky and $485 million in real estate writedowns. Those fees flowed through the operating expense line, which grew 12% to $8.54 billion.

Shares of the bank jumped less than 2%.

Goldman CEO David Solomon faces a tough environment for his most important business as investment banking and trading activity continues to slump. Furthermore, Goldman warned investors about discounts on commercial real estate and declines related to its planned sale of its GreenSky fintech unit.

Unlike more diversified competitors, Goldman gets the majority of its revenue from its volatile Wall Street activities, including commercial and investment banking. This can lead to huge returns during boom and underperform times when markets are not cooperating.

Goldman’s results “reflect the limitations of a business mix that relies more on investment banking and principal investments,” David Fanger of Moody’s Investors Service said in an email. “When customer activity remains weak and higher interest rates put pressure on valuations, profits fall more than banks with high recurring revenues.”

To make matters worse, Solomon has spent the past few quarters backing away from his work The ill-fated push into consumer banking, resulting in expenses associated with downsizing the business.

The bank put up a paltry 4.4% return on average tangible common equity in the quarter, a key performance measure. This is well below his own target of at least 15% and the results of competitors including c. B. Morgan Chase And Morgan Stanleywhich yields returns 25% And 12.1% respectively.

“This quarter reflects the continued strategic execution of our goals,” Solomon said in the earnings release. “I remain very confident that continued execution will enable us to achieve our return targets during the cycle and create significant shareholder value.”

Commercial and investment banking has been weak recently due to weak activity and IPOs amid the Federal Reserve’s interest rate hike. But rival JPMorgan reported better-than-expected trading and banking results last week, saying activity improved late in the quarter, and that raised hopes that Goldman could exceed expectations.

Her results were mixed. Fixed income trading revenue fell 26% to $2.71 billion, just short of the $2.78 billion estimate of analysts surveyed by FactSet. Equity trading revenue was basically unchanged from the prior year at $2.97 billion, easily beating the $2.42 billion estimate.

Investment banking fees fell 20% to $1.43 billion, just below the $1.49 billion estimated.

During a call with analysts Wednesday, Solomon said that while activity levels in parts of investment banking were at their lowest in a decade, he was starting to see signs of life. He said mergers and capital markets were on the way to recovery.

“He’s definitely been feeling better over the past six to eight weeks than he was earlier in the year,” Solomon said.

Asset and wealth management revenue fell 4% to $3.05 billion as the company incurred losses on equity investments and lower incentive fees.

Analysts asked Suleiman for updates on his plan to exit consumer banking. Goldman is said to have been in discussions to offload its Apple Card business to… American ExpressHowever, Suleiman did not address this possibility directly, saying only that the bank’s card linking operations were “long-term partnerships.”