June 22, 2024

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Goldman Sachs holds bearish at end of turbulent year

Goldman Sachs holds bearish at end of turbulent year

Goldman Sachs on Tuesday reported flat profits for the second straight quarter, marking a return to form for the bank that has suffered from management missteps that tarnished its once untouchable reputation on Wall Street.

The bank's fourth-quarter profit of $2 billion was roughly equal to what it made in the third quarter, but that was a sign of accomplishment. Until recently, the bank was reeling from a combination of losses stemming from its failed stab at consumer banking and a deteriorating real estate portfolio, among other problems.

Helping the Bottom Line: Goldman laid off 3,200 employees over the course of 2023, representing a 7 percent decline in headcount. It is included in a long list of multinational companies that have laid off employees in recent months.

Goldman shares rose less than 1 percent, bringing gains to about 9 percent over the past year. But shares are still below their 2021 peak, and the bank's full-year profit of $8.5 billion last year was the lowest since 2019.

Goldman CEO David M. Solomon credited the bank's “clear and streamlined” strategy with helping to right the ship in recent months. “It looks better,” he told analysts.

Mr. Solomon is right that his organization is charting a different course. The bank has been quick to scale back its consumer ambitions, instead relying again on its traditional business of facilitating trading for big-money clients, charging fees for advising on mergers, arranging bond issues and the like.

This strategy leaves its quarterly earnings more closely tied to the whims of financial markets — in fact, the bank made much less profit last year than it did in 2022, thanks in part to an industry-wide slowdown in corporate advisory work — but it also means that the bank and Pretty much the venerable Goldman Sachs of the past.

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Mr. Solomon also pinned his hopes on expanding the bank's asset management operation, a relatively low-margin but steady operation.

Last week, some of Goldman Sachs's rivals reported a mixed set of quarterly results, partly overshadowed by heavy government-ordered costs to replenish a federal insurance fund drained by last year's mid-sized banking crisis. (Goldman pumped $529 million into the fund last quarter.)

However, JPMorgan Chase, Bank of America and Wells Fargo posted billions of dollars in profits, beating analysts' expectations.

Given Goldman's recent struggles, he may take solace in the fact that the industry's new laggards appear to be Citigroup, whose headquarters are a few blocks north of Goldman in Lower Manhattan, and Goldman's longtime rival, Morgan Stanley.

Last week, City revealed a significant loss and intends to reduce about 10 percent of its workforce, or about 20,000 people, as part of a major restructuring process.

Morgan Stanley, which last week agreed to pay $249 million to resolve investigations into its trading arm, on Tuesday reported disappointing earnings that sent its shares down 4 percent — a strong welcome for its new CEO.