Goldman Sachs Group Inc (NYSE:GS). is expected to unveil its Q3 earnings today, Tuesday, with a projected drop in both revenue and profits. The Wall Street heavyweight's shares have seen a minor increase in pre-market trading ahead of the announcement.
The bank's group revenues are forecasted to decline by 6.6% to roughly $11.19 billion, influenced by lower dealmaking fees and its strategic shift away from certain consumer-focused industries. Trading revenue is projected at $2.8 billion for fixed income and $2.73 billion for equities, coupled with an estimated $1.48 billion from investment banking.
Despite attempts at diversification, Goldman Sachs remains heavily reliant on trading and investment banking revenue, which accounted for two-thirds of last quarter's earnings. Merger activity during the first three quarters of 2023 has decreased by 27%, reaching a ten-year low.
Profits are also expected to sharply decrease to $5.31 per share, affected by the level of writedowns in its commercial real estate division and provisions set aside for potential future losses. The Federal Reserve's interest rate increases have impacted debt issuance, IPOs, and mergers; however, recent activity has led analysts to hold positive outlooks for Goldman's deal pipeline.
CEO David Solomon announced that the bank's Q3 earnings would be impacted by a 19 cents per share reduction following the sale of GreenSky, its home improvement lending unit. GreenSky was bought for $1.7 billion in 2021 and sold after a $504 million writedown in Q2 to a consortium led by Sixth Street Partners. This move aligns with the bank's strategic shift towards banking, markets, and a more pronounced focus on wealth management.
Despite these financial challenges and strategic shifts, Goldman's shares have outperformed the KBW Bank Index, dropping only 8.4% compared to the index's 21% drop. Solomon's perspective on the future of investment banking and the role of the Apple (NASDAQ:AAPL) Card business in Goldman's strategy are eagerly awaited by stakeholders.
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