Asset management at Goldman Sachs to no avail

Asset management at Goldman Sachs to no avail

By Kristina Sobol  

Budrigannews.com – Goldman Sachs Group Inc. struggled with a decline in dealmaking and weakness in its wealth management business, resulting in a larger-than-anticipated 69% drop in fourth-quarter profit on Tuesday.

Dealmaking, Wall Street banks’ primary source of revenue, is stalling due to concerns about a weakening global economy and rising interest rates. As a result, the banks are slashing their workforce significantly and streamlining their operations.

As Chief Executive Officer David Solomon refocuses the bank’s resources to strengthen its core businesses, such as investment banking and trading, Goldman is also reducing its plans for consumer banking.

In the most recent quarter, Goldman Sachs saw a 48% decrease in investment banking fees, and its asset and wealth management unit saw a 27% decrease in revenue as a result of lower revenue from equity and debt investments.

Additionally, its platform solutions division, which includes businesses in transaction banking, credit card processing, and financial technology, reported a pre-tax loss of $778 million.

The platform solutions business reported a $1.67 billion net loss for the year, according to the bank.

In premarket trading, the bank’s shares were down 2.5% to $364.56.

A person who is familiar with the plan told Reuters last month that Goldman plans to stop making unsecured consumer loans. This was another sign that the company was moving away from its consumer business.

In the fourth quarter of 2022, provision for credit losses was $972 million, up from $344 million the year before. 

In preparation for a possible recession, the largest banks on Wall Street have increased their emergency fund holdings. However, they have shown caution regarding forecasting income growth in an uncertain economy and as higher rates increase competition for deposits.

During the quarter, Goldman’s total operating costs increased by 11% to $8.1 billion. A source told Reuters last week that the bank would try to cut costs by firing 3,000 people. 

“Costs were difficult to survey, as GS didn’t uncover the severance/rebuilding charges,” UBS experts wrote in a note.

Refinitiv IBES data indicate that the bank missed the Street’s estimate of $5.48 for the three months ended December 31 with a profit of $1.19 billion, or $3.32 per share.

“Widely anticipated to be disappointing, Goldman Sachs (NYSE:)” “The Q4 results were even worse than expected,” Octavio Marenzi, CEO of Opimas, said.

“The real issue is that revenues decreased while operating expenses increased by 11 percent. This strongly suggests that there will be additional cost reductions and layoffs,” he added.

Due to the increased market volatility brought about by the Federal Reserve’s quantitative tightening, Goldman’s trading business was a bright spot.

Revenue from equities trading decreased by 5%, while revenue from fixed income, currency, and commodities trading increased by 44%.

Net revenue decreased 16% to $10.6 billion overall.