Goldman Sachs (NYSE:GS)
Historical Stock Chart
1 Month : From Oct 2019 to Nov 2019
By Liz Hoffman
Goldman Sachs Group Inc.'s third-quarter profit fell 26% from a year ago, hit by a slowdown in deal-making and losses on the bank's stakes in companies.
The bank on Tuesday reported $1.88 billion of net earnings, or $4.79 a share, on $8.32 billion of revenue, roughly in line with what analysts had expected. Shares fell 1.1% in premarket trading.
The bank, run by Chief Executive David Solomon, is pouring money into new initiatives such as consumer banking and ultrafast trading. It is smaller than commercial-banking giants -- with about one-third of the revenue of JPMorgan Chase & Co. -- and doesn't have their big lending businesses to smooth out earnings, either.
Analysts polled by FactSet had expected $1.84 billion of profit, or $4.81 a share, on $8.31 billion of revenue. Through the first nine months of 2019, Goldman is running behind last year's pace on all three measures.
Mr. Solomon, CEO since last fall, is expected to lay out his growth plans for Goldman in early 2020. The priorities he has sketched out so far include growing Goldman's new consumer bank and its private-investing business, cross-selling top corporate clients on products like money management, and cutting costs across the firm.
In a regulatory filing, Goldman said it was in talks with "certain governmental and regulatory authorities" to resolve a yearslong investigation into its dealings with a Malaysian government fund. Goldman is expected to pay a hefty fine, including to the U.S. Department of Justice, for overlooking red flags in its dealings with the fund, known as 1MDB.
The swoon in technology stocks hit Goldman's earnings. The bank took paper losses on its stakes in Uber Technologies Inc. and other companies, including private ones, which fell in value during the quarter. Revenue from investing activities fell 40%, its worst quarter in more than three years.
Investment banking revenue fell 15%, hit by declines in all three of its main products, merger advisory and debt and equity underwriting.
Goldman is the leading stock underwriter this year, according to Dealogic, with $50 billion of deals under its belt and a narrow edge over Morgan Stanley. But the IPO business -- worth $9 billion in fees across Wall Street last year -- looks threatened after a few disastrous debuts.
Peloton Interactive Inc., maker of the $2,000 spin bike, and SmileDirectClub Inc., an at-home-teeth-straightening startup, both stumbled in their IPOs. WeWork's parent company scrapped its offering entirely.
Goldman's revenue from fixed-income trading, a trouble spot in recent years, was up 8% in the quarter. The firm has been cutting down on the money available for its traders to put to work, shifting it to initiatives that are more profitable, like lending, or offer more growth opportunity, like its credit-card partnership with Apple Inc.
Goldman now oversees $1.8 trillion in its asset-management arm, up 6% from June 30. It has been trying to grow its business advising big insurers and pensions on their portfolios, and rely less on its mutual funds, an industry where prices are under pressure.
Write to Liz Hoffman at firstname.lastname@example.org
(END) Dow Jones Newswires
October 15, 2019 08:43 ET (12:43 GMT)
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