(CTN News) – A retreat from consumer businesses and falling investment values led Goldman Sachs Group to report a larger-than-expected decline in second-quarter profits.
For its GreenSky business, the bank took a writedown of $504 million and for its consolidated real estate investments, the bank took a writedown of $485 million.
There hasn’t been a quarterly profit for Goldman Sachs since the second quarter of 2020, making it the lowest since then. For the three months ended June 30, the bank’s earnings fell by more than 60% to $1.07 billion, or $3.08 per share, compared to the same period last year.
There were $2.79 billion in revenue, or $7.73 per share, in comparison to $2.79 billion a year ago. Using data from Refinitiv, analysts had predicted that the company would make $3.18 per share in profits.
Goldman Sachs agreed to buy Greensky, which facilitates home improvement loans for consumers, for $2.2 billion in 2021, and closed the deal at a price of $1.7 billion.
David Solomon, CEO of GreenSky, told analysts in April that the company is “good business,” but given the bank’s strategic priorities, it may not be the best long-term holder of this company.
The Marcus unit of Goldman Sachs was also folded into the merged treasury and asset management arm last year, as the investment bank began to pull back from retail banking in general.
A gain of $100 million was also realized by Goldman Sachs as a result of the sale of “substantially all of the remaining” Marcus loans portfolio.
Goldman Sachs’ asset and wealth management unit posted a 4% decline in revenue compared with last year, the result of real estate investments losing money.
As a consequence of this report, the big U.S. banks were able to wrap up a strong quarter, which showed a strong economy but also showed signs that high borrowing costs will begin to weigh on the demand for loans later this year.
There was a 20% decline in investment banking fees for the quarter to $1.43 billion. Fixed income, currency, and commodity trading revenues declined by 26%, while equity trading revenues remained largely unchanged.
As a result of the Federal Reserve’s ten consecutive rate hikes, the economy is on shaky ground, with many executives anticipating that the economy will slow down in the second half of the year.
However, despite showing some signs of recovery, the mergers and acquisitions market has been unable to roar back to life.
Goldman’s peer Morgan Stanley reported Tuesday that its investment banking revenue was in line with last year, but that its trading business had declined.
It is anticipated that the ongoing recovery in the stock market will encourage dealmaking and encourage more companies to list their shares in the months to come.
There was a 36% decline in global mergers and acquisitions activity in the second quarter compared to the second quarter of last year due to economic uncertainty.