After Dismal Q2, Goldman Sachs Hopeful For Rebound In Merger Activity

Goldman Sachs reported a dive in profits Wednesday on weak merger and acquisition activity, but shares rallied as executives said an improvement could be near.

While Chief Executive David Solomon described the second quarter as a "tough" period, he said on a conference call with analysts that "the environment feels better" in regards to market sentiment.

"If the environment feels better and the environment turns out to be better, you'll see better performance," Solomon said.

Profits came in at $1.1 billion, down 62 percent from the same period a year ago. Revenues fell eight percent to $10.9 billion.

The big investment bank, which has essentially abandoned a once-touted push to compete with retail banks for Main Street consumers, pointed to a "significant decline in industry-wide completed mergers and acquisitions transactions" as a drag on its global banking and markets division.

Revenues also tumbled in trades connected to fixed income, commodities and currencies; revenues were flat in equities trading.

Goldman also suffered a drop in its other main division, asset and wealth management, citing net losses on real estate loans and a pre-tax write-down of $677 million on Greensky, a fintech platform for home improvement loans that Goldman had acquired with fanfare in 2021 but is now looking to divest from.

During the call, executives said they were in the middle of the process of potentially selling Greensky, which Goldman originally bought for $1.7 billion.

Solomon described credit card partnerships with General Motors and Apple as "long-term partnerships," adding that Goldman was focused on improving their performance.

Solomon has come under scrutiny over his management of the bank's consumer banking business, which was begun by predecessor Lloyd Blankfein but aggressively expanded by Solomon.

A recent Wall Street Journal expose described the bank as at "war with itself," highlighting widespread complaints from partners about Solomon that have included criticism of his unusual side habit of working as a disc jockey.

Solomon has been holding private meetings with Goldman partners to try to repair relations, the Journal reported.

On Wednesday, Goldman executives referenced the residual effects of the spring US banking crisis as a drag on market sentiment, further denting merger and acquisition activity in the second quarter.

But Solomon said investment banking operates in cycles, describing an upturn as inevitable.

"The services in advising, the need for mergers and consolidation... IPOs, equity financing, debt financing, that's a fundamental part of our economy," he said. "It's not going away. It's been depressed for the last four to six quarters."

Goldman shares, which were in negative territory in pre-market trading, rebounded as the call progressed. Near 1510 GMT, shares were at $341.99, up 1.4 percent.