Skip to content

Goldman Sachs reports sharp profit drop, highlighting the bank’s problems

    Goldman Sachs reported second-quarter earnings of $1.1 billion, down more than 60 percent from a year earlier.

    The bank highlighted write-downs in the value of its commercial real estate portfolio, a loss of $1.2 billion in profits, and buy-now-pay-later firm GreenSky, which deducted nearly $700 million from its earnings. Goldman acquired GreenSky less than two years ago, as part of an ill-fated foray into consumer lending.

    Quarterly revenue of $10.9 billion was 8 percent lower than a year ago.

    At the end of June, the bank employed 44,600 people, 2,400 less than a year earlier. Goldman has suffered at least three rounds of layoffs this year, dropping its workforce by 8 percent year-to-date.

    This seems to have been a rip-the-Band-Aid-off quarter for Goldman. In particular, real estate write-downs seemed to pack potential losses into the period.

    However, there are good reasons for the move. Remote or hybrid work seems to be here to stay, with dismal implications for office space and landlords in many cities. Having already suffered some losses in that area, Goldman is now able to shift focus to other areas of the business, such as investment banking, which tends to ebb and flow.

    “It definitely feels better over the course of the last six to eight weeks than it did earlier this year,” Mr Solomon said.

    The big question for Mr. Solomon is whether he can convince investors – and many within his own company – to return to the dreaded Goldman of yesteryear.

    The bank is nearly a year into an extensive apology for its consumer woes, which at one point included Marcus, a consumer division named after the company’s founder, credit card offerings and savings accounts aimed at the mass market. The bank said this year it had lost more than $3 billion to those efforts since December 2020.

    The bank is still winding down most of the business, at a loss, and can expect more ugly headlines until that wraps up.

    Unlike more diversified lenders like JPMorgan Chase, Goldman leans heavily on its Wall Street franchise, and business activity has been muted in the face of economic uncertainty, rising interest rates and the like. That means if there’s a prolonged chill in deal making, there may be little the bank can do to completely isolate itself.