Earnings Results: Goldman Sachs, Bank of America earnings shrink but offer some bright spots

by | Jul 18, 2022 | Stock Market

Goldman Sachs Group Inc. and Bank of America Corp. shares pared some of their steep losses for the year Monday, as they aired second-quarter results that provided bright spots despite lower overall earnings from the year-ago period. The two megabanks marked the last two of the six megabanks reporting weaker profits amid stark changes in financial markets, which swung to the current bear market from a bull market a year ago.

Citigroup Inc.
reported better-than-expected results on Friday, while Wells Fargo & Co.
missed. On Thursday, JPMorgan Chase & Co.
and Morgan Stanley
both fell short of analyst estimates. Goldman Sachs shares
rose 2.7% in morning trading, after it said its net income for the three months ended June 30 fell to $2.77 billion, or $7.73 a share, from $5.35 billion, or $15.02 a share, in the year-ago quarter.Revenue dropped to $11.86 billion from $15.39 billion in the year-ago quarter.Goldman Sachs handily beat the analyst estimates for earnings of $6.56 a share on revenue of $10.78 billion, according to FactSet. Goldman said it booked a 79% drop in asset management revenue to $1.08 billion, while its investment banking revenue fell back by 41% to $2.14 billion as deal-making slowed drastically from a strong year-ago quarter. These weak spots were partially offset by a 32% increase in global markets revenue to $6.47 billion and a 25% boost in consumer and wealth management revenue to $2.18 billion. Goldman Sachs Chief Executive David Solomon echoed comments from other bank chieftains by flagging “increased volatility and uncertainty” in markets, rocked by inflation, interest rates hikes and Russia’s invasion of Ukraine. “We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets,” Solomon said. On a call with analysts, Goldman said it would slow the pace of hiring as it re-examines spending and investment plans amid the challenging operating environment. CEO Solomon said he believes it’s “prudent” to be cautious given the uncertainty in how high the Federal Reserve will raise rates to fight inflation. “The environment is very uncertain,” Solomon said, according to a FactSet transcript. “We don’t have a crystal ball to tell you exactly how monetary policy will navigate the inflationary environment that exists, but there’s no question that economic conditions are tightening to try to control inflation, and as economic conditions tighten, we’ll have a bigger impact on corporate confidence and also consumer activity in the economy.” Jefferies analyst Daniel Fannon reiterated a buy rating on Goldman and said its global markets unit shined in the quarter amid strong performance in fixed income and equities. Asset management revenues “were also better than feared” while investment banking was generally in line. Goldman Sachs shares have fallen 21.1% in 2022, compared with a drop of 13.5% by the Dow Jones Industrial Average

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