Goldman Sachs Profit Falls On Sluggish Deals And Bond Trading, Marcus Loss

Goldman Sachs Group Inc's profit fell 19% as dealmaking and bond trading slumped in the first quarter and it lost money on the sale of some assets in its consumer business.

Investment banking activity remains extremely muted, and while there are some green shoots emerging, clients remain cautious, CEO David Solomon said in a post earnings call.

"Recent events in the banking sector are lowering growth expectations and there is a higher risk of credit contractions given the environment is limiting banks' appetite to extend credit," Solomon said in a post earnings call.

Investor confidence in the banking sector was shaken in March after Silicon Valley and Signature Bank failed, two of the largest failures in the U.S. banking history.

Solomon said Goldman's overall results were solid and demonstrated the resilience of big banks after the failures.

Goldman lost $470 million on the sale of the Marcus loans after its foray into consumer banking, which Solomon had championed for years, flopped.

The bank's net profit applicable to common shareholders fell to $3.09 billion in the quarter, compared with $3.83 billion a year earlier, while earnings per share slid to $8.79 from $10.76 last year, it said on Tuesday.

Excluding one-time costs, the Wall Street heavyweight earned $9.87 per share, exceeding the analysts' average estimate of $8.10 per share, according to Refinitiv data.

Shares fell more than 1.6% to $334.26 in afternoon trading.

Global mergers and acquisitions activity shrank to the lowest level in more than a decade in the first quarter, according to data from Dealogic. That hurt Goldman's investment banking fees, which dropped 26% to $1.58 billion.

Revenue from fixed income, currency and commodities (FICC) trading, usually a bright spot, plunged 17% to $3.93 billion, while equity trading revenue sank 7% to $3.02 billion.

"The revenue shortfall versus our expectations came mainly on FICC trading and equity investments, which are of course both relatively volatile," Chris Kotowski, a banking analyst at Oppenheimer & Co, wrote in a note.

Revenue in Goldman's asset and wealth management unit rose 24% to $3.2 billion. Still, that reflected a 10% decline from the end of fourth quarter last year.

Net revenue fell 5% to $12.22 billion in the first quarter.

Goldman is exploring strategic options for its consumer platform business, which has lost about $3 billion in three years, executives told investors in February. It's also considering a sale for GreenSky, a fintech business that it bought for more than $2 billion in 2021.

But deposits held in the Marcus business remain core to Goldman and are not under review, a source familiar with the matter had told Reuters earlier this year.

Goldman reshuffled its main divisions in 2022, shifting the focus back to its traditional mainstays of trading and investment banking, beefing up its asset management arm and stepping back from its consumer aspirations.

Goldman's lackluster trading results contrast those of Bank of America Corp, which also reported earnings on Tuesday. BofA's profit beat analysts' estimates after its bond traders had their best quarter in a decade.