Goldman Sachs misses first-quarter revenue estimates after taking $470 million hit on Marcus loans

Goldman Sachs misses first-quarter revenue estimates after taking $470 million hit on Marcus loans

David Solomon, chief executive officer of Goldman Sachs Group Inc., during a Bloomberg Television at the Goldman Sachs Financial Services Conference in New York, US, on Tuesday, Dec. 6, 2022. 

Michael Nagle | Bloomberg | Getty Images

Goldman Sachs posted first-quarter profit on Tuesday that missed analysts’ expectations for revenue after taking a $470 million hit tied to the sale of consumer loans.

Here’s what the company reported:

  • Earnings: $8.79 a share vs. $8.10 estimate from Refinitiv
  • Revenue: $12.22 billion vs. $12.79 billion

The bank said profit fell 18% to $3.23 billion, or $8.79 a share, topping the estimate of analysts surveyed by Refinitiv. Revenue fell 5% to $12.22 billion, below the estimate on the consumer loan hit and weaker-than-expected bond trading results.

Shares of the New York-based bank slipped 3.7% in premarket trading.

Unlike its more diversified rivals, Goldman gets the majority of its revenue from Wall Street activities, primarily trading and investment banking. Heading into the quarter, analysts wondered whether turmoil during March — in which two American banks failed and a global investment bank was forced to merge with a longtime rival — would provide a good or bad backdrop to trading.

While JPMorgan Chase and Citigroup beat first-quarter estimates in part because of better-than-expected fixed income trading, Goldman’s traders didn’t fare as well.

Fixed income trading revenue in the quarter fell 17% to $3.93 billion, roughly $230 million below the StreetAccount estimate, on lower activity in currencies and commodities. Equities trading revenue slipped 7% to $3.02 billion, edging out the $2.9 billion estimate.

While investment banking revenue remained weak, falling 26% from a year earlier to $1.58 billion, that was better than the $1.44 billion estimate.

So far this earnings season, big banks have mostly outperformed their smaller peers, helped by an influx of deposits after Silicon Valley Bank’s meltdown. But since retail banking plays a small — and probably shrinking — role at Goldman, much more focus will be on how trading and investment banking fared, and what expectations are for later this year.

Separately, analysts will want to hear what has come of CEO David Solomon’s proclamation in February that Goldman was weighing “strategic alternatives” for its consumer platforms business. That has been interpreted as potentially selling off the GreenSky business it acquired recently or offloading credit-card partnerships with Apple and others.

And they’ll likely ask for details about Goldman’s part in helping Apple offer new savings accounts; the product launched with a higher interest rate than the bank’s own Marcus product has.

Goldman shares have dipped 1.1% this year before Tuesday, a better showing than the nearly 17% decline of the KBW Bank Index.

Last week, JPMorgan Chase, Citigroup and Wells Fargo all topped profit expectations amid rising rates. Morgan Stanley is scheduled to release results Wednesday.

This story is developing. Please check back for updates.

(With Inputs from cnbc)

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