Goldman Sachs profit falls in first quarter as dealmaking sputters

GOLDMAN Sachs Group’s first-quarter profit fell 19 per cent as sluggish dealmaking eroded the Wall Street giant’s fees from investment banking, while losses from the sale of some loans from its consumer unit, Marcus, weighed on the results.

Goldman booked a US$470 million loss on the sale as the bank rejigs its strategy after a foray into consumer banking, which chief executive David Solomon had championed for years, flopped.

It is also exploring strategic options for its consumer platform business, which has lost about US$3 billion in three years, executives told investors in February.

Goldman reshuffled its businesses last year, leaning into its traditional mainstays of trading and investment banking, beefing up its asset management arm and stepping back from its consumer aspirations.

“The events of the first quarter acted as another real-life stress test,” CEO Solomon said in a statement.

Shares of the bank fell 3.6 per cent to US$327.65 in premarket trading. As of last close, they have lost nearly 3 per cent since March 8 when Silicon Valley Bank unveiled its attempt to raise capital and triggered a meltdown in banking stocks.

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Goldman’s profit in the quarter ended Mar 31 fell to US$3.09 billion compared with US$3.83 billion a year earlier, while earnings per share slid to US$8.79 from US$10.76 last year, it said on Tuesday (Apr 18).

Global mergers and acquisitions activity shrank to its lowest level in more than a decade in the first quarter of 2023, according to data from Dealogic. That hurt Goldman’s investment banking fees by 26 per cent to US$1.58 billion.

Revenue from fixed income, currency and commodities (FICC) trading, usually a bright spot, fell 17 per cent to US$3.93 billion, while equity trading revenue fell 7 per cent to US$3.02 billion.

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Peer JPMorgan Chase had last week reported a 24 per cent drop in investment banking revenue. Its fixed income trading revenue was flat, while equity trading revenue plunged 12 per cent.

Goldman’s net revenue in the quarter fell 5 per cent to US$12.22 billion.

Meanwhile, Bank of America’s first-quarter profit beat market expectations as it collected hefty interest payments from customers, while the lender’s traders extended their winning run. REUTERS