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Goldman Sachs (GS) Q2 2023 Earnings

Goldman Sachs (GS) Q2 2023 Earnings

Goldman Sachs on Wednesday reported earnings that came in below analysts’ expectations on commercial real estate-related writedowns and the sale of its GreenSky lending division.

Here’s what the company reported:

  • Earnings: $3.08 per share vs. $3.18 per share, Refinitiv estimate
  • Revenue: $10.9 billion versus an estimate of $10.84 billion

Second-quarter earnings fell 58% to $1.22 billion, or $3.08 per share, due to sharp declines in commercial and investment banking, as well as losses related to GreenSky and legacy investments that weighed on the Earnings per share fell by approximately $3.95. Revenue fell 8% to $10.9 billion.

The company announced a $504 million impairment related to GreenSky and $485 million in real estate writedowns. Those charges flowed through the operating expense line, which rose 12% to $8.54 billion.

The bank’s shares rose less than 1%.

Goldman CEO David Solomon faces a challenging environment for his core businesses as the slump in investment banking and trading activity drags on. Additionally, Goldman had warned investors about commercial property writedowns and impairments related to the proposed sale of fintech unit GreenSky.

Unlike more diversified peers, Goldman derives the bulk of its revenue from volatile Wall Street activities, including trading and investment banking. This can lead to inflated returns during boom times and underperformance during periods when markets don’t cooperate.

To make matters worse, Solomon has backtracked on its ill-fated foray into retail banking in recent quarters, which has incurred costs related to the downsizing of the business.

“This quarter reflects the continued strategic execution of our goals,” Solomon said in the earnings release. “I remain fully confident that continued execution will enable us to meet our earnings targets throughout the cycle and create significant value for shareholders.”

The bank delivered a meager 4.4% return on average tangible equity for the quarter, a key performance metric. This is far below their own target of at least 15% and also below the results of the competitors JPMorgan Chase And MorganStanleywhich achieved returns of 25% and 12.1%, respectively.

Trading and investment banking have been weak of late as activity and IPOs have been muted amid Federal Reserve rate hikes. But competitor JPMorgan reported better-than-expected trading and banking results last week and said activity improved towards the end of the quarter, raising hopes Goldman could beat expectations.

Fixed income trading revenue fell 26% to $2.71 billion, just below the estimate of $2.78 billion by analysts polled by FactSet. Equity trading revenue was $2.97 billion, essentially flat from a year earlier, beating the estimate of $2.42 billion.

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

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

Analysts will likely be asking Solomon for updates on his plan to exit retail banking. Goldman was reportedly in talks to spin off its Apple Card business American Expressbut it is unclear how far these talks have progressed.

Goldman shares are down nearly 2% this year through Wednesday, compared with the roughly 18% drop in the KBW Bank Index.

On Friday, JPMorgan, Citigroup And Wells Fargo Both reported earnings that beat analysts’ expectations on a backdrop of higher interest rates. Tuesday, Bank of America And MorganStanley also reported results that exceeded forecasts.

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