Goldman Sachs Group’s profit showed a sharp drop in the second quarter of this year.
For the giant of the American banking sector, the last quarter turned out to be one of the most difficult in its history. The profit of the financial institution showed a negative trend. The financial result is due to the deterioration of the situation with the investment attractiveness, the markdown of real estate, and the write-off of business reputation in the consumer business.
The bank’s total net revenue in the second quarter amounted to $10.9 billion, which is a decrease of 8% compared to the same period last year. The total amount of assets under the supervision of the lender increased to a record $2.71 trillion. At the end of March, this figure was equal to $ 2.67 trillion.
Return on equity, which is the main indicator of profitability, decreased by 4% over the past quarter. This result is the worst among the leading US banks.
The lender, before the publication of the report on financial results for the second quarter of 2023, tried to underestimate expectations. Against this background, analysts have almost halved their profitability estimates since the beginning of June. The value of the bank’s shares decreased by 1% during trading in New York.
Goldman’s management tried to smooth out the unstable results that are recorded after active profit growth during the coronavirus pandemic. Experts also believe that the bank has missed a number of profitability targets.
At the same time, stock trading turned out to be a successful experience for a financial institution. In the second quarter, as a result of this activity, the bank received revenue of $ 3 billion, ahead of its main competitors. Initial expectations regarding this indicator were at $2.47 billion.
The revenue of Goldman’s asset and wealth management business for the reporting period amounted to $ 3.05 billion. This figure is 4% less than the result of a year ago. Analysts predicted that the bank’s revenue in this business segment would amount to $ 3.5 billion.
Goldman aggressively uses its own balance sheet for investment activities. According to experts, this strategy generates significant fluctuations in financial indicators. The bank tends to rely more on fees for investing in other institutions.
Also, the financial institution recorded a sharp decrease in the level of operating expenses, which is the result of the depreciation of some consolidated real estate investments and the write-off of goodwill. The depreciation caused about $1 billion in damage.
The bank has started selling the GreenSky business. This is evidence that the management of a financial institution is decidedly moving away from the retail banking strategy.
David Solomon, Chairman and CEO of Goldman, said that the second quarter was evidence that the bank continues to move towards achieving strategic goals. According to him, the financial institution is a leader in completed mergers and acquisitions, which, as he believes, is a reflection of a world-class client franchise.
As we have reported earlier, Goldman Sachs partners Modern Treasury to push embedded payments.
