Goldman Sachs
can prove that it’s serious about getting back to its investment banking roots when it posts third-quarter earnings on Tuesday.
Expectations for the earnings, which come out before the opening bell, are muted. Aside from a handful of initial public offerings—
Arm Holdings
(ticker: ARM) and
Instacart
(CART) are two big ones—over the past few months, capital markets activity has been low.
And even though markets have been frenzied with the surge in bond yields, trading revenue isn’t expected to wow either.
Profit at Goldman Sachs (GS) is expected to fall 32% to $2 billion, amounting to earnings of $5.42 a share on revenue of $11.2 billion.
With deal-making and trading off sharply from the booming times of 2021, Wall Street will instead be focused on more strategic issues, such as the bank’s retreat from its costly foray into consumer banking.
Last week, Goldman announced it had sold lending platform GreenSky to a consortium of institutional investors led by Sixth Street. The bank completed its GreenSky acquisition only last year to the tune of $1.7 billion; the sale to Sixth Street will translate to a loss, which will lower earnings by 19 cents a share.
“This transaction demonstrates our continued progress in narrowing the focus of our consumer business,” said Goldman CEO David Solomonsaid last week, noting the sale would allow the bank to focus on its strengths in investment banking and wealth management. “While GreenSky is an attractive business, we are focused on advancing the strategy we laid out for our two core franchises.”
The sale comes as Goldman has pulled back on other consumer-focused endeavors. In August, the bank sold its mass affluent-focused personal financial management business to Creative Planning, an Overland Park, Kan.-based registered investment advisor. The financial terms weren’t disclosed at the time.
There may be further signs of Goldman’s retreat from consumer banking. The bank’s senior executives are hoping Goldman exits its remaining consumer businesses such as its
Apple
(AAPL) credit card, other Apple products, and its General Motors (GM) credit card, The Wall Street Journal reported Monday.
Goldman partners have complained those businesses have been more trouble than they are worth, the Journal reported, citing sources familiar with the matter. That said, it is unclear if Goldman would be able to completely unload those businesses given the Apple credit card’s loss rates, the outlet reported.
Goldman declined to comment.
Either way, on Tuesday, Wall Street will want some indication of how Goldman is thinking about its remaining consumer business before showing more confidence in the bank.
Write to Carleton English at [email protected]
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