Goldman Sachs said on Monday its second-quarter net profit more than doubled to $3.04 billion from $1.2 billion a year earlier.
In terms of the numbers, it says as much about the obstacles the bank faced 12 months ago as it does about its current situation: Goldman took a $989 million impairment charge in the second quarter of 2023, nearly half of which was on real estate investments and the rest was related to GreenSky, a home improvement lender the bank has since sold.
The bank’s net revenue rose 17% year over year to $12.7 billion, though certain segments saw faster growth, such as asset management and wealth administration revenue, which rose 27% to $3.9 billion.
Investment banking fees rose 21%, a rate that pales in comparison to JPMorgan Chase & Co., which reported a 46% increase in the second quarter, and Citi, which saw fees rise 60%.
Goldman CFO Dennis Coleman said during the earnings call on Monday. The bank remains No. 1 in market share for mergersAccording to CNBC.
Bank losses also appear to have fallen significantly compared to the same period last year. Goldman reported second-quarter provisions for credit losses of $282 million, down 54% from April-June of last year.
On a more molecular level, Goldman took a $58 million charge related to its credit card business with General Motors, which is reportedly in talks to replace Goldman with Barclays, and Apple is also reportedly looking to end its credit card partnership with Goldman.
If Goldman’s enthusiasm seems to be waning, it may be coming from the top down.
“We are pleased with our strong second-quarter performance and overall performance in the first half of the year, with strong year-over-year growth in both our Global Banking and Markets and Asset and Wealth Management segments,” CEO David Solomon said Monday. (Global Banking and Markets on Monday reported a 14% increase in revenue.)
Some of the tension likely stems from the results of still-painful stress tests set by the Federal Reserve. The bank’s stress capital buffer is 6.4% and its common equity Tier 1 requirement is 13.9%.
“The year-over-year increase in our stress capital buffer does not appear to reflect the strategic evolution of our business or the continued progress toward reducing the stress loss intensity that the Fed has recognized in the past three tests,” Solomon said on a conference call on Monday, according to Bloomberg. “Given this discrepancy, we are engaging with regulators to better understand their decisions.”.”
Indeed, Goldman disputed the stress test results in a letter to the Fed, the Financial Times reported on Sunday, citing people familiar with the matter.
The Fed has allowed banks to challenge the results of its stress tests since 2020, but the bank has yet to change its initial assessment, even though eight banks, including Goldman, have filed complaints disputing the results.
The Fed is expected to reexamine Goldman’s tests for errors and announce a decision on the appeal in August, according to the Financial Times..
