Last Updated on October 18, 2022 by Bitfinsider
The company reported that their profit dropped by 43% to $3.07 billion, or $8.25 per share, which was more than the average forecast of $7.69 per share provided by analysts surveyed by Refinitiv. Despite a decline in revenue of 12% to $11.98 billion, analysts’ projections were exceeded by more than $500 million. The slowdown in initial public offerings (IPOs) this year brought about the anticipated drop in revenue for Goldman Sachs.
In the morning session, shareholders of the bank saw their value increase by 5%.
David Solomon, CEO of Goldman Sachs, stated that the results demonstrate the company’s “strength, breadth, and diversification,” and he officially announced a corporate reorganization that had been reported on earlier this week. Solomon’s comments came after the news of the reorganization broke earlier this week.
Solomon stated that “today, we enter the next phase of our growth, introducing a realignment of our businesses that will enable us to further capitalize on the predominant operating model of One Goldman Sachs.” “Today, we enter the next phase of our growth, introducing a realignment of our businesses,” he said. “We are convinced that the evolution of our strategic plan will generate returns that are both higher and more stable over the long run for our shareholders.”
As a result of traders taking advantage of increased client activity in bonds and currencies in the midst of volatile markets, Goldman’s fixed income traders were able to generate $3.53 billion in revenue, which is a 41% increase from the same period a year earlier and approximately $500 million more than what analysts had anticipated.
The revenue generated by equity traders came in at $2.68 billion, which is a 14% decrease from the previous year but was more than the projection of $2.59 billion.
The disappointing results in investment banking were more than compensated for by the robust trading performance. Revenue in investment banking fell by 57% to $1.58 billion, which was lower than the $1.84 billion projection made by analysts.
Additionally, the bank’s other departments, including asset management and consumer and wealth management, performed above and beyond what was anticipated.
The decrease in revenue from asset management was 20%, coming in at $1.82 billion. This was due to decreased gains from private equity stakes. However, this was still higher than the revenue forecast of $1.65 billion.
The increase in consumer and wealth management revenue was 18% higher than the expectation of $2.19 billion, coming in at $2.38 billion. This was accomplished with the assistance of increased credit card balances and increasing interest rates.
The results were on par with those achieved by Goldman’s rivals throughout the quarter. While competitors such as JPMorgan Chase and Morgan Stanley saw substantial decreases in investment banking revenue during the third quarter, better-than-expected earnings in fixed income amidst tumultuous markets helped buoy their institutional operations.
An unanswered concern is how much longer the bank’s consumer business will continue to lose money. This is a sensitive topic among investors because the bank’s consumer business is acting as a drag on the corporation at a time when the stock price is falling.
According to those who are familiar with the idea, Solomon’s corporate reform will result in the bank’s three primary divisions rather than the current four main divisions. According to the sources, this decision results in the division of Goldman’s consumer activities, with each element being placed into one of the two new firms.
In a note to staff that was acquired by CNBC on Tuesday, Solomon stated that the new departments will be referred to as Asset & Wealth Management, Global Banking & Markets, and Platform Solutions respectively. According to him, the alterations would become active in the month of December.
The Marcus division of the company was barely mentioned in Solomon’s memo, and the only thing he said about it was that it had been folded into the more extensive Asset & Wealth Management operations.
Solomon made the announcement about the change in his retail finance strategy during a conference call with analysts. He stated that the bank will now focus on existing Marcus customers as well as potential customers available through workplace and personal wealth channels “rather than seeking to acquire customers on a mass scale.”
According to him, the shift will make it easier for Goldman to “rationalize” its expenditure on costs associated with acquiring new customers and developing new products.
According to Solomon, the company’s partnerships with Apple, which include a credit card and a new savings account, have been expanded and extended through the end of the decade.
He went on to say that the organization would have an Investor Day at the end of February.
Solomon is most likely interested in rectifying the situation in which Goldman shares have the lowest price in relation to their tangible book value among the six largest banks in the United States, with the exception of Citigroup.
In comparison to the drop of 26% that the KBW Bank Index has seen so far this year, the bank’s shares have dropped approximately 20% as of Monday.
By earning more interest income than was anticipated, both JPMorgan and Wells Fargo were able to exceed analysts’ projections for their third-quarter profit and revenue last week. Citigroup also outperformed analysts’ expectations, but Morgan Stanley fell short as a result of the impact turbulent markets had on the firm’s investment management unit.
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