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Goldman Sachs’s stock falls as profit tops target but revenue falls short

Goldman Sachs Group Inc.’s stock lost ground Tuesday after the investment bank’s first-quarter revenue fell short of the consensus estimate, while net income beat the Wall Street forecast. The company’s latest revenue figure included a previously undisclosed loss of about $470 million from the partial sale of the loan portfolio of its Marcus consumer-banking business

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Goldman Sachs Group Inc.’s stock lost ground Tuesday after the investment bank’s first-quarter revenue fell short of the consensus estimate, while net income beat the Wall Street forecast.

The company’s latest revenue figure included a previously undisclosed loss of about $470 million from the partial sale of the loan portfolio of its Marcus consumer-banking business and the transfer of the remainder of the portfolio to held-for-sale.

Goldman Sachs shares GS, -1.11% fell 1.6% on Tuesday. The stock is down 2.7% in 2023, compared with a 3.1% drop by the Financial Select SPDR ETF XLF, +0.24% and a 2.1% year-to-date gain by the Dow Jones Industrial Average DJIA, +0.01%.

The company also confirmed plans to review the potential sale of its GreenSky personal lender unit for home-improvement and healthcare costs. Goldman closed its acquisition of the company in 2022 after announcing an all-stock deal valued at $2.2 billion in late 2021.

“We may not be the best long-term holder of this business,” CEO David Solomon said on the bank’s conference call with analysts.

Looking ahead, Solomon said he doesn’t expect a significant pickup in deal making until the second half of 2023. The bank sees growth opportunities in its core banking and markets franchise, which he said are “incredibly well positioned.”

The bank is also seeing an opportunity to grow its wealth-management business in Europe as clients look to diversify their holdings after the acquisition of Credit Suisse CS, +0.71% by UBS UBS, -0.18%.

Goldman Sachs said its first-quarter earnings fell to $3.09 billion, or $8.79 a share, from $3.83 billion, or $10.76 a share, in the year-ago quarter.

First-quarter revenue dipped to $12.22 billion from $12.93 billion.

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Analysts expected Goldman Sachs to earn $8.14 a share on revenue of $12.76 billion, according to estimates compiled by FactSet.

Citi analyst Keith Horowitz reiterated a buy on Goldman Sachs and said, “When [you] sift through the noise, results were better than consensus.”

David Wagner, portfolio manager of the Opus Small Cap Value ETF OSCV, -0.87%, said the noisiness in the quarter may not bode well for the future job security of Goldman CEO Solomon by some time in 2024, if the bank’s upcoming quarterly results don’t smooth out.

“The market loves simplicity — they don’t want complex stories,” Wagner said. Solomon has lost some merit points on Wall Street for leading Goldman’s push into consumer banking in 2021 followed by a pullback in 2022 and 2023.

“If you continue to see noise around the stock, it’ll be inevitable” that Goldman’s board could potentially seek a successor to Solomon, Wagner said.

Goldman’s results came the same day that Bank of America Corp. BAC, +0.29% reported stronger-than-expected profit and revenue.

Solomon said the company turned in a “solid” performance despite turmoil in the banking sector in March following the collapse of Silicon Valley Bank and efforts by the U.S. banking system to shore up deposits at First Republic Bank FRC, -3.04%.

“The events of the first quarter acted as another real-life stress test, demonstrating the resilience of Goldman Sachs and the nation’s largest financial institutions,” Solomon said in a statement.

Solomon credited Goldman’s “deeply rooted risk-management culture, strong liquidity and robust capital position” for allowing it to support its clients during the quarter.

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Fixed-income net revenue fell 17% to $3.93 billion, which reflected lower net revenue in fixed income, currency and commodities (FICC) intermediation. The business also reported lower net revenues in currencies and commodities, partially offset by “significantly higher” interest-rate-product revenue and higher revenue in mortgages and credit products.

Solomon pointed out that the business had a difficult year-earlier gain of 22% in FICC for comparison. Goldman benefited from a big surge in commodity trading during the initial invasion of Ukraine by Russia early last year.

Goldman’s $470 million loss from the sale of its Marcus loan portfolio was largely offset by a related reserve reduction of about $440 million in its provision for credit losses.

Global banking and market revenue fell 16% to $8.44 billion. Investment-banking fees fell 26% to $1.58 billion. Revenue in equities fell 7% to $3.02 billion. Asset- and wealth-management revenue rose 24% to $3.22 billion.

Asked about the deal environment for mergers and other transactions, Solomon said volatility during the first quarter had caused some talks to slow down, but that larger companies continue to seek out greater scale to grow their business.

The bank is now seeing more dialogues starting up again, but Solomon said many deals may not reach fruition until the second half of the year.

Deal activity by private-equity firms remains muted amid a reset in deal prices that began about five quarters ago. In the past, activity has typically picked up after four to six quarters of a reset period, Solomon said.

Asked about Goldman’s new savings account with 4.15% interest for Apple Inc.’s AAPL, +0.45% Apple Card customers, Solomon said the business will open up Goldman’s deposit base without much overlap with its existing savings-account customer base.

Goldman Sachs retained its No. 1 position in worldwide completed mergers and acquisitions for the year to date.

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Prior to Tuesday’s move, Goldman Sachs’ stock was down 1% in 2023, compared with an 8.1% rise by the S&P 500 SPX, +0.06%.

Read on: Bank earnings ‘off to a good start,’ with Bank of America and Goldman Sachs on deck

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