By Ketki Saxena
Investing.com -- Goldman Sachs (NYSE:GS)CEO David Solomon is facing increased scrutiny after the Wall Street giant reported a 58% drop in profits for the second quarter of 2023, compared to the same period last year. The decline was largely attributed to decreases in the company's core businesses of investment banking and trading, along with impairment charges related to its holdings of a consumer lender and commercial real estate.
Despite the challenging quarter, Solomon expressed optimism during a conference call on Wednesday, July 19, 2023. He noted that June had shown improvement over the earlier part of the quarter and that he had observed a more "risk-on sentiment" in July. "It definitely feels better over the course of the last six to eight weeks than it felt earlier in the year,” Solomon stated.
However, author William Cohan warned that if Solomon fails to rectify this downward trend in the third and fourth quarters, his tenure could be at risk. Devin Ryan of JMP Securities acknowledged that Q2 was tough but also noted emerging "green shoots."
Solomon's strategic shift has been under scrutiny as he tries to move past a costly experiment in consumer banking that has left Goldman Sachs grappling with partner unrest and a global deal-making slowdown. Yet, according to two sources close to Solomon, Goldman Sachs' board supports his focus on its core Wall Street businesses and asset management.
The expected addition of Tom Montag, former Bank of America (NYSE:BAC) Chief Operating Officer, to Goldman's board signals internal support for Solomon's turnaround plans. Montag, who previously worked at Goldman for 22 years and served as co-head of its global securities business, is known for his intense and hands-on approach.
Despite the challenges, Goldman Sachs remains a leading adviser for global mergers and acquisitions in H1 2023 according to Dealogic. The company continues to seek growth opportunities and recently held a board meeting in India where they met with Prime Minister Narendra Modi.
However, despite Goldman's shares rising by more than 1.5% during Solomon's conference call on Wednesday, they have remained broadly flat across the year, lagging behind competitors Morgan Stanley (NYSE:MS) and JPMorgan Chase (NYSE:JPM) whose shares have risen by 9% and 15% respectively.