Goldman Sachs had a ‘miserable’ quarter – but broader market destruction could be imminent
Goldman book (GS) – Get a free report report dismal Q4 2022 earnings January 17. The bank may not be alone, with friends investment bank Morgan Stanley (TEACHER) – Get a free report also reported a drop in profits, but its shocking divergence captured headlines around the financial world.
“We tried to do too much and too fast,” said CEO David Solomon. earnings call. “I think maybe in some places we just don’t have the talent needed to perform the way we want to.”
The problem is probably not just a matter of talent, as quarterly profits fell by as much as 66% and earnings per share came in at $3.32 – 39% below the $5.48 estimate. la.
Goldman Sachs’ problem runs deep
Goldman predicted trouble a long time ago. The investment bank announced company-wide layoffs in early January. All told, the bank has cut about 6.5% of its workforce and warned that more is likely to come.
“If things don’t get better in the first quarter, we’ll have more changes,” says compensation consultant Alan Johnson speak. “You can’t let these expensive people sit around with nothing to do.”
Goldman blamed the cuts largely on trading – or lack of it – in 2022. Proceeds from initial public offerings (IPOs) are down 94%. Goldman’s workforce is also considered relatively abundant, as the bank has been hiring heavily during the pandemic when money is cheap and deals are plentiful.
“Predicted to be very bad, Goldman Sachs’ fourth quarter results were even worse than expected,” said Octavio Marenzi, CEO of consulting firm Opimas. CNBC.
total revenue fell 16% from the previous quarter. The two biggest drags on profitability are Goldman’s Wealth & Wealth Management division and the Global Banking & Markets division.
But the problem is not limited to over-employment. Banks were hit harder for credit losses, as they were forced to allocate more cash to their credit card and lending businesses. Last year, Goldman lost $344 million due to credit losses. This year, that number has nearly tripled, at $972 million.
Looks like things are getting more expensive at Goldman. Even running the company is more expensive, as operating expenses increased 11% year-on-year.
Goldman’s problems could be an early sign of what’s ahead
While it might be easy to treat Goldman Sachs’ problems as an isolated incident, the bank certainly doesn’t see it that way.
Goldman’s chief financial officer Denis Coleman warned those on the call that the bank was seeing a possible squeeze on Main Street soon.
“We are seeing early signs of credit deterioration in line with our expectations,” Coleman said. “We anticipate more pressure in 2023.”