Goldman Sachs Group Inc (GS)

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Goldman's second-quarter profit plunges on GreenSky, real estate impairments
By: Investing.com | July 19, 2023

(Reuters) -Goldman Sachs Group's second-quarter profit fell more than 60% as a retreat from consumer businesses and declining investment values took a toll on the Wall Street giant.

The bank took a writedown of $504 million tied to its GreenSky business and $485 million related to its consolidated real estate investments.

It reported on Wednesday a profit of $1.07 billion, or $3.08 per share, for the quarter ended June 30, compared to $2.79 billion, or $7.73 per share, a year earlier.

Greensky (NASDAQ:GSKY), which facilitates home improvement loans to consumers, was acquired by Goldman in September 2021 in a $2.24 billion stock deal, which closed a year ago.

CEO David Solomon told analysts in April that GreenSky is a "good business" but the bank might not be the "best long-term holder of this business" given its strategic priorities.

Goldman's asset and wealth management unit brought in 4% lower revenue compared to last year, hurt by losses from real estate investments.

The bank's report rounds out a strong quarter for big U.S. banks, which pointed to a resilient economy but offered further evidence that high borrowing costs will begin to weigh on loan demand later this year.

Investment banking fees for the quarter fell 20% to $1.43 billion. Trading revenue for fixed income, currency and commodities fell 26%, while equities trading revenue was broadly unchanged.

Ten straight rate hikes by the Federal Reserve have left the economy on a shaky ground, with many executives predicting a slowdown in the second half of the year.

That has prevented the market for mergers and acquisitions from roaring back to life even as it has begun to show some signs of recovery.

On Tuesday, Goldman's peer Morgan Stanley (NYSE:MS) said its investment banking revenue was in line with last year, but the trading business had weakened.

Analysts are optimistic that an ongoing recovery in stock markets will encourage dealmaking and prompt more IPO hopefuls to list their shares in the coming months.

However, uncertainty about the trajectory of the economy continues to be a hurdle with global mergers and acquisitions activity falling 36% from last year in the second quarter.

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