Numbers
Goldman Sachs reported profits of $1.1 billion in the second quarter, down more than 60 percent from a year earlier.
The bank highlighted writedowns in the value of its commercial real estate portfolio, hit $1.2 billion in earnings, and buy-now-pay-later GreenSky, which subtracted nearly $700 million from its earnings. Goldman acquired GreenSky less than two years ago, as part of an ill-fated foray into consumer lending.
Quarterly revenue, at $10.9 billion, was 8 percent lower than it was a year ago.
The bank employed 44,600 people at the end of June, down 2,400 from the previous year. Goldman has gone through at least three rounds of layoffs this year, with headcount down 8 percent so far this year.
Takeaway
Apparently this was a fake quarter for Goldman. Real estate write-downs, in particular, seem to be piling up potential losses in this period.
However, there are good reasons for this step. It appears that remote or hybrid work will remain, and that is having grim implications for office space and landlords in many cities. Having already conceded some losses in this area, Goldman can now turn attention to other areas of the business such as investment banking, which tends to ebb and flow.
“It definitely feels better over the past six to eight weeks than it did earlier in the year,” said Mr. Solomon.
context
The big question for Solomon is whether he can convince investors — and many within his company — to return to the old, much-feared Goldman.
It’s been almost a year since the bank issued a lengthy apology for consumer woes, which at one point involved Marcus, a consumer division named after the company’s founder and offering credit cards and savings accounts aimed at the mass market. The bank said this year it has lost more than $3 billion related to these efforts since December 2020.
Still unraveling most of the business, the Bank is at a loss and may expect more ugly headlines until this is done.
What then
Unlike more diversified lenders like JPMorgan Chase, Goldman relies heavily on its Wall Street franchise, and corporate activity has been muted in the face of economic uncertainty, rising interest rates and the like. This means that if there is a prolonged cold in deal-making, there may be little the bank can do to isolate itself completely.