Goldman Sachs revenue drops across most businesses

Goldman Sachs reported lower quarterly revenue in nearly all of its main businesses on Monday, but still beat subdued Wall Street expectations through cost cuts, while offering more details on its sweeping operational revamp.

Goldman’s first-quarter profit dropped 20 per cent, with declines across trading, underwriting, investment management and investing and lending. One bright spot was its financial advisory business, where revenue soared 51 per cent on higher deal volumes.

Goldman shares fell nearly 2 per cent in premarket trading.

Goldman, the fifth-largest US bank by assets, has been working since 2017 to reduce its reliance on volatile businesses like trading and push further into consumer lending.

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Goldman plans to increase retail deposits by at least $10 billion (€8.8 billion) a year over the next few years, according to a presentation it released alongside earnings on Monday. That will help the bank reduce its cost of funding by about 1 percentage point.

Goldman is also trying to become more efficient, an effort that could reduce costs relative to revenue by 1 percentage point and boost the return on equity by about 0.4 per cent.

Goldman is finalising broader performance targets, and plans to offer a comprehensive update in the first quarter of 2020, according to the presentation.

Reposition for growth

"There's a lot of work that needs to be done at this company to reposition it for growth over the next decade," David Hendler, an analyst at Viola Risk Advisors bank, said in an interview. "Not completing the strategic review until 2020 is ridiculous. It should be done by the next quarter."

The first-quarter profit fell to $2.2 billion, or $5.71 per share, from $2.7 billion, or $6.95 per share, a year ago.

Analysts, on average, expected a profit of $4.89 per share, according to data from Refinitiv. Total revenue fell 13 per cent to $8.8 billion, missing estimates. The biggest drop came from Goldman’s trading business, which was hurt by lower market volatility and the impact of the US government shutdown.

Rivals JPMorgan Chase & Co and Citigroup also reported declines in trading revenue of 10 per cent and 6 per cent, respectively.

Goldman's operating expenses fell 11 per cent to $5.9 billion, mostly on a sharp drop in compensation costs. Investors may not put much weight in the decline since Goldman might just shift the timing of accruing expected bonuses to later in the year, Citigroup analyst Keith Horowitz said in a note to clients.

Chief executive David Solomon, who took over the job last year, said he was "pleased" with the bank's performance, given a muted start to 2019. – Reuters