Goldman profit hit by real estate markdowns, dealmaking slump

investmentnews.com:

Goldman Sachs Group Inc.’s profit plunged as the Wall Street giant notched one of its weakest quarters under Chief Executive David Solomon.

Second-quarter earnings fell 58% on an investment banking slump, real estate markdowns and a goodwill write-down in the consumer business, which houses the GreenSky lending business. Return on equity, a key measure of profitability, slid to 4% — the worst among the top U.S. banks. 

The firm had been actively tamping down expectations heading into the report, prompting analysts to slash their estimates for quarterly profit by almost half since mid-June. Shares of the company fell 1.4% in early New York trading.

Goldman’s management has been working to smooth the firm’s sometimes volatile quarterly results, which featured big gains during the post-pandemic boom followed by a run of missed profitability goals. Investors are looking to see whether the second quarter represents a trough for the company, with a steadier run of earnings gains ahead.

Equity trading revenue was one bright spot, coming in ahead of the firm’s major rivals at $3 billion, compared with estimates for $2.47 billion. Goldman has now clinched the top rank in that business in three of the past four quarters. 

The asset and wealth management business posted revenue of $3.05 billion, down 4% from a year earlier and below analysts’ estimates for $3.5 billion. The unit was buffeted by the bank’s exposure to the real estate sector, with write-downs on both its lending portfolio and its equity investments contributing to a $1.15 billion pretax earnings hit tied to principal investments.

Unlike most of its major competitors, Goldman has aggressively used its own balance sheet to make investments, a strategy that can lead to