Quiver Quantitative - Goldman Sachs (NYSE:GS) reported its eighth consecutive quarterly profit decline, largely attributed to significant real estate write-downs and a continued downturn in dealmaking. This drop leaves the firm's profitability hovering around half of its set target. While property investments contributed to a $212 million loss in the equity book last quarter, trading revenue that surpassed analysts' expectations provided some respite. Despite this, Goldman's shares dipped by as much as 2.1%.
CEO David Solomon has been shifting gears, moving away from consumer banking expansion to refocus on core business aspects. The bank's return on equity remains at 7.1%, notably below the mid-teens target Goldman has set for itself. Solomon remains optimistic, expressing confidence in reaching the mid-teens target and delivering greater returns to shareholders. However, ongoing political uncertainties in Washington, potential interest rate hikes, and global conflicts have slowed the recovery and return to a semblance of normalcy in the capital markets, despite Goldman's leadership in M&A advisory and equity underwriting.
The bank's stock price has been on a decline, down more than 25% since late 2021, heading for a consecutive annual drop. Amidst internal discontent and increased scrutiny, Solomon received public support from the board's lead director. Additionally, recent activities, such as the sale of the GreenSky unit for less than half its valuation from two years prior, further impacted the bank's financial performance. Trading revenue remained fairly stable year over year, while investment banking revenue stood at $1.56 billion, slightly exceeding analysts' expectations. Despite leading numerous IPOs recently, a cautious stance prevails about when markets will regain their usual momentum.
Goldman's asset and wealth management sector witnessed a 6% revenue increase from the previous quarter, breaking a three-quarter decline trend. The bank's effort to unwind its balance-sheet investments has seen them drop to $21 billion, while also raising $15 billion in third-party alternative fundraising during the quarter. Furthermore, Goldman recently sold its investment-advisory business to Creative Planning, signaling a renewed focus on its traditionally strong ultra-rich clientele. This all comes as Goldman grapples with leadership overhauls in its transaction-banking division due to compliance issues.
This article was originally published on Quiver Quantitative