Steep Profit Fall at Goldman Sachs Highlights Wall St. Giant’s Woes

The Numbers

Goldman Sachs reported a revenue of $1.1 billion within the second quarter, down greater than 60 % from final 12 months.

The financial institution particularly highlighted write-downs within the worth of its industrial actual property portfolio, a $1.2 billion hit to revenue, and the buy-now-pay-later agency GreenSky, which subtracted almost $700 million from its earnings. Goldman acquired GreenSky lower than two years in the past, as a part of an ill-fated foray into client lending.

Quarterly income, at $10.9 billion, was 8 % decrease than final 12 months.

The financial institution employed 44,600 individuals on the finish of June, down 2,400 from the identical interval final 12 months. Goldman has gone by way of at the least three rounds of layoffs this 12 months, taking head rely down 8 % to this point this 12 months.

Takeaways

This appears to have been a rip-the-Band-Aid-off quarter for Goldman. The actual property write-down, particularly, appeared to pack potential losses into the interval.

There are, nevertheless, good causes for the transfer. Remote or hybrid work seems right here to remain, and that has bleak implications for workplace house and landlords in lots of cities. Having already conceded some losses in that space, Goldman can now shift consideration to different areas of the enterprise.

“This quarter reflects continued strategic execution of our goals,” David Solomon, Goldman’s chief government, stated in an announcement.

Context

The large query for Mr. Solomon is whether or not he can persuade traders — and plenty of inside his personal agency — of a return to the much-feared Goldman of yore.

Unlike extra diversified lenders like JPMorgan Chase, Goldman depends closely on its Wall Street franchise, and company exercise has been muted within the face of financial uncertainty, rising rates of interest and the like. That implies that if there’s a extended chill in deal-making, there could also be little that the financial institution can do to totally insulate itself.

What’s Next

The financial institution is sort of a 12 months into an prolonged apologia for its client woes, which at one level included Marcus, a client division named after the corporate’s founder.

The financial institution continues to be unwinding the companies, at a loss, and it might count on extra ugly headlines till that’s completed.