- Goldman Sachs’ first-quarter earnings, released on Tuesday, fell short of analysts’ expectations.
- The disappointing results come as CEO David Solomon re-organizes Goldman’s businesses.
- Here are 5 things the CEO can do to prove he has the right plan for Goldman Sachs.
David Solomon just came off the most challenging year of his tenure as CEO at Goldman Sachs. The bank’s disappointing latest quarterly results won’t help.
Goldman Sachs’s first-quarter results published Tuesday showed revenue fell compared to the same period last year to $12.2 billion, below analysts’ expectations. Tarnishing the comparison to 2022 was a slowdown in fixed-income trading, long a key plank of Goldman’s business, and a desultory M&A environment that has given the firm little opportunity to flex its tried-and-true advisory muscles.
All this comes against the backdrop of Goldman’s broader retreat from its expensive foray into consumer banking that cost the firm $6 billion and widespread layoffs across the bank in January. As Insider has previously reported, discontent with Solomon’s performance has resulted in grumblings from Goldman’s highest ranks, its vaunted group of partners.
To be sure, it’s still early days in Solomon’s shift away from Goldman’s money-losing consumer banking business. Last October, Goldman Sachs announced the reorganization of its businesses into divisions that more closely resemble the bank of old. In doing so, Solomon vowed to return the bank to its roots as an investment banking and trading powerhouse while building a growing asset and wealth management business.
And Goldman’s earnings weren’t all bad. On a per share basis, the bank beat earnings estimates. Goldman, meanwhile, was able to negate the $470 million hit it took in selling much of its Marcus loan portfolio by lowering the amount it set aside for credit losses.
That said, the bank’s first-quarter earnings also highlight Solomon’s many challenges in proving the 154-year-old bank is on the right track following its humbling backtrack from consumer banking. He has to maintain the bank’s M&A crown after cutting staff and bonuses to lower costs, while also growing the bank’s wealth management business into a stable source of recurring revenue that rivals Morgan Stanley’s.
During the bank’s first-quarter conference call, Solomon sounded optimistic about the bank’s M&A pipeline. He also downplayed concerns about its fixed-income trading. He said he sees an opportunity to grow its wealth management business in Europe thanks to the demise of Credit Suisse, which has been forced to merge with its healthier Swiss banking rival UBS.
Here are the 5 things Solomon will need to do to prove Goldman is on the right track. They include beating the pants off the M&A advisory competition, selling home improvement lender GreenSky at a price that isn’t embarrassing, and winning bigger in fixed-income trading.
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