Goldman Sachs Sees Profits Plummets Amid Consumer Pivot

Goldman Sachs saw its profits slump 33% in its latest quarter, as the bank continues retreating from the consumer banking sector.

(Photo by Connor Lin/The Daily Upside)

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It will always be known on Wall Street as the day the music died.

First, we learned that Goldman Sachs saw its profits slump 33% in its latest quarter, as the bank continues retreating from the consumer banking sector and its property investments ring up over $200 million in losses. Then came the shocker: CEO David Solomon publicly announced an early retirement from his beloved second career as a DJ.

The Poison Apple

This marks the eighth straight quarter of declining profit for Goldman. And, as per usual, dissenters in the ranks are reportedly still arguing the bank should spend more time on its core caviar crowd, and a little less time on the Filet-O-Fish set. On Monday, The Wall Street Journal reported that at least one executive — and many employees — had voiced disapproval of the joint bank accounts Goldman launched with Apple in April. Other execs also have called for a swift exit from the credit card partnership with the tech giant, but, according to the WSJ, talks with American Express to offload that business have yet to bear fruit.

Goldman’s consumer banking woes don’t end there, either. Last week, the bank sold off GreenSky — an installment-lending platform it acquired less than two years ago — at less than half the price it valued the unit at when it bought it for $2.24 billion, Bloomberg reported. Goldman took a writedown of over $500 million tied to the sale in Q2, and took another roughly $65 million hit on it in its latest quarter.

Goldman’s core businesses, however, have proved somewhat more reliable:

  • Trading revenue in Q3 was flat at $6.3 billion, despite analyst expectations of a double-digit dropoff. Meanwhile, investment banking revenue narrowly beat expectations, while its equities business saw an 8% year-over-year increase.
  • Meanwhile, with total deal value for IPOs this year down 30%, according to Dealogic, Goldman has managed to lead or co-lead all of this fall’s major public market debuts. And while M&A deal value is similarly down nearly 30%, Goldman scored a role in Exxon’s $60 billion acquisition of Pioneer Natural Resources — 2023’s biggest merger so far.

Bonus Points: Still, there may be more reason for consternation than celebration. Goldman’s return on equity of just 7% in its latest quarter sits far below its mid-teens goal. To soothe discontented staffers, Goldman said it’s boosting the portion of revenue it pays to employees — setting aside an extra $690 million compared to a year ago. Money can always solve a lot of issues, and potentially even help Goldman win its protracted war to return staffers to the office five days a week — though assurances of no more impromptu DJ D-Sol sets may go a long way in that department, too.