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Goldman Sachs reported a profit of $1.1 billion in the second quarter, down more than 60 percent from last year.
The bank specifically highlighted the decline in the value of its commercial real estate portfolio, a $1.2 billion drop in profit, and buy-now-pay-later firm GreenSky, which slashed nearly $700 million from its earnings. Goldman acquired GreenSky less than two years ago as part of an ill-fated foray into consumer lending.
Quarterly revenue, of $10.9 billion, was down 8 percent from the prior year.
The bank employed 44,600 people at the end of June, down 2,400 from the same period last year. Goldman has gone through at least three rounds of layoffs this year, reducing its workforce by 8 percent so far this year.
takeaway
It appears to have been a Band-Aid-off quarter for Goldman. Real estate write-downs, in particular, appeared to cover potential losses in this period.
However, there are good reasons for this move. It appears that remote or blended work is here to stay, and this will have depressing effects on office space and landlords in many cities. Having already accepted some losses in that area, Goldman can now focus on other areas of the business.
“This quarter reflects the continued strategic execution of our goals,” Goldman Chief Executive David Solomon said in a statement.
Context
The big question for Mr. Solomon is whether he can persuade investors — and many at his own company — to return to the much-loved Goldman of old.
Unlike more diversified lenders such as JPMorgan Chase, Goldman relies heavily on its Wall Street franchise, and corporate activity has been quiet due to economic uncertainty, rising interest rates, etc. This means that there is little that the bank can do to protect itself completely if there is a long pause in the bargaining.
what will happen next
The bank has been apologizing for more than a year for its consumer woes, which at one point included Marcus, a consumer division named after the company’s founder.
The bank is still loss-making and winding down its business, and it can expect more ugly headlines until it closes.
