UK (Commonwealth Union)_ After a surge in IPOs in 2018 and a comparatively low number in 2022, a decrease in the revenue and profit of Goldman Sachs was anticipated.
The bank’s shares increased more than 4% on the morning of the results, in part because the figures showed an unexpected increase in fixed income trading revenue, which increased 41% from the previous year to $3.5 billion. Due to smaller profits from private equity investments, asset management income decreased 20% to $1.8 billion, exceeding estimates for $1.65 billion in revenue. However, the restructure has continued to worry some analysts, particularly because Goldman has been unable to narrow a stock price gap with other comparable banks.
The bank intends to reduce the number of divisions from four to three by combining its trading and investment banking businesses. According to Will Howlett, an equities research analyst at Quilter Cheviot, “the decision to hold down on the expansion ambitions of Marcus, the bank’s consumer savings unit,” was the most striking part of the restructure. The move, he added, “marks a turnaround from the investor day in early 2020 where the digital consumer bank was emphasized as one of the group’s four growth aspirations.”
The department has come under scrutiny following allegations of employee turnover and operational losses, however management was coy about the magnitude of these during the Q3 results conference. Even though Sec is one of the “preeminent global investment banks”, the difficult market circumstances have “negatively impacted practically all of its operations”, according to Gerard Cassidy, analyst with RBC Capital Markets in a letter to investors. According to Devin Ryan, director of new fintech research at JMP Securities, the bank’s results had been “solid” given the challenging market environment, demonstrating “the resiliency of its diversified business model”, while the organizational changes it had announced were “more a streamlining than a repositioning”.
