Goldman Sachs has posted a smaller-than-expected 48% slide in Q2 2022 profits and warned that it may slow down hiring and cut expenses amid volatile market conditions and a slump in deal activity.
The US investment banking group’s net earnings applicable to common shareholders was $2.8bn in the three-months to 30 June 2022, compared with $5.3bn in the year ago quarter.
Diluted earnings per common share (EPS) for Q2 2022 were $7.73 as against $15.02 a year ago.
Net revenues tumbled 23% to $11.86bn in Q2 driven by lower net revenues in asset management and investment banking units.
This was partially offset by significantly higher net revenues in the bank’s global markets and consumer & wealth management divisions, the company said.
The group’s investment banking revenue fell 41% from a year ago to $2.1bn due to a plunge in underwriting activity and deals.
However, the revenues at the global markets unit, which houses the bank’s trading desks, rose 32% year-on-year to $6.47bn.
Asset management net revenue was $1.08bn, down 79% compared with the second quarter of 2021. The decrease reflected net losses in equity investments and significantly lower net revenues in lending and debt investments.
Net Revenue at Goldman Sachs’s Consumer & Wealth Management climbed 25% to $2.18bn in Q2 with wealth management and consumer banking divisions recording net revenues of $1.57bn and $608m, respectively.
Provision for credit losses totalled $ $667m in the quarter compared with $92m in the prior year period.
The annualised return on average common shareholders’ equity (ROE) was 10.6% for Q2 2022 while annualised return on average tangible common shareholders’ equity (ROTE) was 11.4%.
Goldman Sachs chairman and CEO David Solomon said: “We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets.
“Despite increased volatility and uncertainty, I remain confident in our ability to navigate the environment, dynamically manage our resources and drive long-term, accretive returns for shareholders.”
In the previous quarter, Goldman recorded a 42% fall in profits.
Re-examining spending, investment plans
Goldman Sachs CFO Denis Coleman told analysts on an earnings’ call that the bank is closely re-examining its spending and investment plan to ensure the best use of its resources, according to a report by Reuters.
Coleman said: “Specifically, we have made the decision to slow hiring velocity and reduce certain professional fees going forward, though these actions will take some time to be reflected in our results.”
The bank is also planning to reinstate its annual performance review for employees at the end of the year. The annual performance review process was suspended by the bank in the wake of the Covid-19 pandemic.