Goldman Sachs makes a successful landing at the end of a tumultuous year

Goldman Sachs makes a successful landing at the end of a tumultuous year

Goldman Sachs reported its second consecutive quarter of stable profits on Tuesday, a return to form for the bank, which has been plagued by management errors that tarnished its once untouchable reputation on Wall Street.

The bank’s fourth-quarter profit of $2 billion was about equal to its third-quarter profit, but it was a sign of success. Until recently, the bank had been grappling with numerous losses due to, among other problems, its failed venture into consumer banking and a degraded real estate portfolio.

To improve results: Goldman is cutting 3,200 employees during 2023, a reduction of 7% of its workforce. It is one of a long list of multinational companies that have laid off staff in recent months.

Goldman’s shares rose less than 1 percent, bringing the gain to about 9 percent over the past year. But shares remain below their 2021 peak, and the bank’s annual profit of $8.5 billion last year was the lowest since 2019.

Goldman Chief Executive David M. Solomon credited the bank’s “clear and simplified” strategy with helping right the ship in recent months. “It’s getting better,” he told analysts.

Mr. Solomon is right that his organization is following a different path. The bank has sought to scale back its consumer ambitions and is again relying on its traditional work of facilitating trades for large clients, charging fees for merger advice, arranging issuance bonds, etc.

This strategy leaves its quarterly profits more closely tied to the vagaries of financial markets – indeed, the bank earned significantly less last year than in 2022, thanks in part to a slowdown in business advisory work across the board. sector – but it also means the bank looks more like the venerable Goldman Sachs of old.

Mr. Solomon also pinned his hopes on an expansion of the bank’s asset management operations, a relatively low-margin but stable business.

Last week, some of Goldman’s rivals reported mixed quarterly results, partly clouded by heavy spending ordered by the government to replenish a federal insurance fund depleted by last year’s crisis at midsize banks. (Goldman invested $529 million in the fund last quarter.)

Still, JPMorgan Chase, Bank of America and Wells Fargo generated billions of dollars in profits, beating analysts’ expectations.

Given its recent struggles, Goldman can take solace in knowing that the industry’s new laggards appear to be Citigroup, headquartered a few blocks north of Goldman’s in Lower Manhattan, and a rival to longtime Goldman, Morgan Stanley.

Citi last week revealed a significant loss and plans to cut about 10 percent of its workforce, or about 20,000 people, as part of a major restructuring.

Morgan Stanley, which last week agreed to pay $249 million to resolve investigations into its trading arm, reported disappointing results on Tuesday that sent its shares down 4 percent – an encouraging welcome for its new head general.

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David B.Otero

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