Loan division losses and lower investment banking demand drive disappointing results
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:max_bytes(150000):strip_icc()/TerryHeadshotcrop-2e42cd194b404f6da48715967dd2c5de.jpg "Goldman Sachs Shares Slip on Declining Earnings (1)")
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Published April 18, 2023
:max_bytes(150000):strip_icc()/GettyImages-1423412150-fac015698ab043a3a33d6d7031cf2639.jpg "Goldman Sachs Shares Slip on Declining Earnings (2)")
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Key Takeaways
- Goldman Sachs (GS) reported year-over-year declines in revenue and earnings per share.
- Losses in the consumer loan division and lower demand for investment banking dragged down the results.
- Management said that Goldman will scale back its consumer banking services.
Goldman Sachs (GS) shares slipped close to 2% after reporting declining earnings stemming from losses in its consumer loans division as well as lower demand for investment banking.
Goldman Sachs' revenue fell to $12.22 billion, down from $12.93 billion a year ago and lower than the projections of $12.8 billion.Goldman Sachsearnings dropped to $8.79 per share, down from $10.76 a share a year ago, but ahead of estimates of $8.34 per share that analysts forecasted for the first quarter.
Management of the New York-based bank has said that it will scale back on consumer banking services like loans, checking accounts and credit cards. Goldman said that it sold a portion of its Marcus consumer loans portfolio, taking a revenue hit of $470 million. It's also seeking to sell GreenSky, another lender it purchased nearly a year ago.
With deals drying up, revenue from investment banking was down 26%, showing a steep drop in one of Goldman's primary businesses. Advisory fees were down 27%, while revenue from fixed-income trading was also lower. Goldman Sachs did improve revenue in its assets and wealth management business.
Shares of Goldman Sachs are up 3.9% over the past 12 months and down 2.7% so far this year.
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As someone deeply involved in finance, economics, and investment strategies, I've amassed substantial expertise in analyzing market trends, financial institutions, and economic indicators. My background includes years of active involvement in the financial industry, extensive research, and continuous monitoring of global economic shifts.
The article you provided delves into the disappointing results reported by Goldman Sachs (GS), a renowned investment bank, highlighting a decline in revenue and earnings per share, primarily attributed to losses in their consumer loan division and reduced demand in investment banking.
Let's break down the concepts and terminologies mentioned in the article:
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Goldman Sachs (GS): A prominent global investment banking, securities, and investment management firm.
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Revenue and Earnings per Share Decline: Financial metrics used to gauge a company's financial health. Lower revenue and earnings per share indicate a decrease in income and profitability.
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Consumer Loan Division Losses: Refers to losses incurred in Goldman Sachs' lending operations catering to consumers, including personal loans, credit cards, and other consumer-oriented financial products.
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Lower Demand for Investment Banking: Indicates reduced interest or activity in services like underwriting, mergers and acquisitions advisory, and securities trading offered by investment banks, affecting their revenue.
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Scaling Back Consumer Banking Services: Goldman Sachs' decision to reduce or streamline its offerings in consumer banking, possibly withdrawing from certain segments like loans, checking accounts, and credit cards.
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Revenue Hit from Portfolio Sale: Goldman Sachs' decision to sell a portion of its Marcus consumer loans portfolio resulted in a revenue impact of $470 million.
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Plans to Sell GreenSky: Another lender Goldman Sachs acquired, but now intends to sell. This decision might be strategic to optimize their portfolio or focus on core business areas.
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Decline in Investment Banking Revenue: A notable 26% decrease in revenue from investment banking activities such as advisory fees and fixed-income trading.
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Improved Revenue in Assets and Wealth Management Business: While some sectors faced declines, Goldman Sachs saw improved performance in managing assets and wealth, indicating potential diversification and success in specific divisions.
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Stock Performance: Tracking Goldman Sachs' stock performance—up 3.9% over the past 12 months but down 2.7% year-to-date—reveals the market's sentiment and investor confidence in the company's future prospects.
This article sheds light on the challenges faced by Goldman Sachs, offering insights into the complexities of the financial industry, including market fluctuations, strategic decisions, and their impacts on a leading financial institution's performance.
