Goldman Sachs (GS) is set to reveal its third-quarter earnings today, and CEO David Solomon is under pressure to boost profits. In pre-market trading, GS shares have inched higher, generating anticipation in the financial world.
Analysts predict a 6.6% dip in overall group revenues for the iconic Wall Street investment bank, which is expected to land at around $11.19 billion. This decline can be attributed to reduced dealmaking fees and the bank’s strategic exit from some consumer-focused businesses.
The merger activity for the first nine months of 2023 has slumped by about 27% compared to the previous year, with only approximately $2 trillion in deals completed, marking the lowest total since 2013. Third-quarter fees, according to Dealogic, are down 17% from the previous year, amounting to $15.2 billion.
Profits are also likely to take a hit from last year, with expectations of Goldman posting earnings of $5.31 per share. However, this figure depends on the bank’s decisions regarding writedowns in its commercial real estate division and the amount of capital it reserves to cover potential future losses.
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In addition to these challenges, Goldman Sachs will suffer a 19 cents per share hit to its third-quarter earnings due to the sale of GreenSky, its home improvement lending unit, which concluded earlier this month. This unit was acquired for $1.7 billion in 2021 and sold to a consortium led by private equity group Sixth Street Partners, after a $504 million writedown in the second quarter.
CEO David Solomon, who has been facing criticism from investors due to the bank’s lackluster profits, explained that the sale of GreenSky is part of Goldman’s strategic shift towards banking and markets, along with a renewed focus on wealth management.
In pre-market trading, Goldman Sachs shares have risen by 0.13%, suggesting an opening bell price of $314.80 per share. As the financial world eagerly awaits the Q3 earnings report, all eyes will be on whether David Solomon’s revitalization plan will help the bank regain its profitability.
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