The Blubber

Goldman Sachs reported a significant decline in its profits on Wednesday, attributed to a downturn in dealmaking and trading activities, which are integral to the core operations of the mega bank. Additionally, the institution faced a considerable setback with an almost $1 billion devaluation of its consumer and real estate ventures.

The latest earnings report from Goldman reveals that its investment banking revenue experienced a reduction of around 20% in the second quarter of 2023. Trading revenue also saw a decline of 14%. Overall, the bank's profits plummeted by 58% compared to the previous year, amounting to $1.2 billion.

Although Citigroup and Morgan Stanley also reported profit declines, Goldman's decrease was the most substantial among its peers.

For the second quarter, the company achieved an earnings per share of $3.08, falling short of the anticipated $3.16 per share as predicted by analysts from FactSet. Notably, Goldman is currently the only major bank to have fallen below earnings per share estimates.

This marks the weakest quarterly profits since the early months of 2020, during the recession prompted by the pandemic. The unfavorable report is likely to intensify scrutiny on CEO David Solomon, who has faced pressure due to the contraction of the bank's consumer-oriented activities.

Solomon acknowledged the challenging macroeconomic environment and the specific headwinds affecting Goldman's array of businesses during the earnings call. He commented, "Activity levels in many areas of investment banking hover near decade-long lows and clients largely maintained a risk-off posture over the course of the quarter."

Despite these challenges, Solomon pointed to positive signs emerging in the realm of mergers and acquisitions (M&A). He noted, "It definitely feels better over the course of the last six to eight weeks than it felt earlier in the year. I know this level of 10-year lows in investment banking activity is not going to be the norm moving forward."

Looking ahead, Solomon emphasized that streamlining the consumer lending division will release resources and time for the bank to concentrate on strategic endeavors central to its mission.