(New York) U.S. investment bank Goldman Sachs reported sharply lower second-quarter net profit on Wednesday, still suffering from weak activity in the M&A sector, but the market preferred to focus on optimism leaders.
Net profit plunged 62% in the second quarter, falling to $1.1 billion, also affected by asset management which again stalled.
Revenue was $10.90 billion over the same period.
These two data are in line with analysts’ forecasts.
On the other hand, diluted per share and excluding exceptional items, earnings amounted to 3.08 dollars for the quarter against 7.73 dollars a year earlier. Analysts had expected $3.10.
“The lower earnings, while disappointing, are hardly a surprise,” noted Fitch Ratings analyst Mark Narron.
The results released Tuesday by Morgan Stanley “set the stage for those of Goldman Sachs” in the minds of market operators, analysts at Briefing.com commented.
The publication of Goldman Sachs was rather well received on Wall Street, where the action of the investment bank gained 1.38%, to 341.91 dollars.
The group’s performance also suffered a sharp decline compared to the first quarter of this year (-65% for profit), which had already been marked by a drop in the activity of its investment bankers and brokers.
David Solomon, CEO of the US bank, said in a statement that he remains “completely confident that the continued implementation (of the group’s strategy) will achieve (his) exit targets. cycle and create significant shareholder value”.
During a conference call with analysts, he pointed out that the group’s results had suffered the consequences of its “strategic transition” – particularly in wealth management – while operating in “a difficult macroeconomic environment with headwinds , specifically for (his) activity profile”.
Mr. Solomon cited persistent inflation, geopolitical tensions and slowing growth.
According to him, many sectors of investment banking “are flirting with lows that have not been reached for a decade and clients generally maintained a risk-averse posture during the quarter”.
But “the environment looks better” and “if the environment gets better, then you will see better performance,” he said.
The annualized return on capital (earnings to equity) for the time being is still very low at 4% for the quarter and 7.8% for the first half, when management’s objective – confirmed on Wednesday – is to ‘get around 15%.
The fall in turnover in the Global Banking and Markets branch (mergers and acquisitions, IPOs, capital raising) and in asset management was partially offset by the increase in the Platform Solutions branch (financial products ), noted the group.
In investment banking, Goldman Sachs saw a “significant decline across the industry in completed mergers and acquisitions.”
Regarding the future of Greensky, an internet credit specialist bought for $ 2.2 billion in September 2021, no decision has been made at this stage, the leaders said.
This activity, which was intended to diversify Goldman Sachs into retail banking, weighed $677 million on second quarter pretax income.
“The $504 million impairment related to Greensky, while small, illustrates the company’s struggles to execute on its diversification strategy at a time when its core business is being challenged,” Narron noted.
In February, the group announced a refocusing on its historical activities and indicated that it was exploring “strategic alternatives” for those not part of it – for which it spent a provision of nearly a billion dollars at the end of 2022 -, including including an assignment.
By contrast, credit card partnerships (Apple, General Motors) — attached to the same division as online lending — are “long-term partnerships,” executives said Wednesday.