Goldman Sachs is sticking the landing at the end of a tumultuous year
Goldman Sachs reported its second consecutive quarter of steady profits on Tuesday, a return to form for the bank that has struggled with management missteps that tarnished its once-untouchable reputation on Wall Street.
The bank's fourth-quarter profit of $2 billion was about the same as what it earned in the third quarter, but that was a sign of performance. Until recently, the bank was dogged by a slew of losses due to, among other things, its failed attempt at consumer banking and a soured real estate portfolio.
What will help the bottom line: Goldman has laid off 3,200 employees over the course of 2023, a workforce reduction of 7 percent. It joins a long list of multinational companies that have laid off staff in recent months.
Goldman's shares rose about 1 percent in trading before the market opened, which would add to its gain of about 8 percent over the past year. But shares are still down from their 2021 peak and the bank's annual profit of $8.5 billion last year was the lowest since 2019.
Goldman CEO David M. Solomon praised the bank's “clear and simplified” strategy for righting the ship in recent months.
Mr. Solomon is right when he says that his organization is charting a different course. The bank has struggled to scale back its consumer ambitions, relying instead on its traditional work: facilitating trading for cash-rich customers, charging fees for merger advice, arranging bond issues and such.
That strategy makes quarterly profits more closely dependent on the vagaries of financial markets – in fact, the bank earned significantly less last year than it will in 2022, thanks in part to an industry-wide slowdown in business advisory work – but it also means the bank looks more like the venerable Goldman Sachs of old.
Mr Solomon has also pinned hopes on expanding the bank's asset management business, a relatively low-margin but stable business.
Last week, some of Goldman's rivals reported mixed quarterly results, partly overshadowed by high government-imposed costs to replenish a federal insurance fund depleted by a crisis at midsize banks last year. (Goldman poured $529 million into the fund last quarter.)
Yet JPMorgan Chase, Bank of America and Wells Fargo generated billions of dollars in profits, exceeding analyst expectations.
Given its recent troubles, Goldman can take comfort in the fact that the industry's new laggard appears to be Citigroup, whose headquarters are just a few blocks north of Goldman's in lower Manhattan. Citi announced a major loss last week and plans to cut about 10 percent of its workforce, or about 20,000 people, as part of a major restructuring.