Goldman Sachs Isn’t Transforming Fast Enough

livemint.com:

Goldman Sachs’s winding journey in consumer banking might be coming to an end. But its prolonged exit from its own investment holdings still has miles to go. With deal making in a slump, and capital markets and trading activity subdued or just starting to grow back, the second quarter was never going to be a stellar one for Goldman Sachs.

But a rough quarter turned into a grim one with a series of one-off items that highlighted Goldman’s halting transformation into a steadier bank, less reliant on the ups and downs of Wall Street. Investors might not have flinched much at a quarter featuring an annualized return on equity of around 9%—that is what Morgan Stanley printed in the second quarter and its shares jumped 6.5%. And that is what Goldman said its result would have been without those one-offs.

Instead, it was a quarter featuring a 4% return, after those items reduced earnings by $1.4 billion. One item that will grab attention will be a $504 million impairment of the value of GreenSky—an acquired lender that was once a core part of its consumer banking strategy—which Goldman is now in the process of selling. The firm’s broader downshift in consumer was flagged months ago and has been in the works.

The Wall Street Journal has reported that Goldman is even exploring getting out of its credit-card partnership with Apple. More notable, though, should be a series of markdowns related to real-estate investments. These losses highlight that one of the sources of hard-to-predict volatility in the firm’s results—mark-to-market adjustments in the value of the equity and debt investments Goldman carries on its own balance sheet—is still with the firm for now, and will be for some time.