Tuesday 15 October 2019 2:37 pm

Goldman Sachs misses profit forecasts amid slump in advisory fees

Goldman Sachs has missed Wall Street estimates for quarterly profit, amid fewer fees from advising on deals.

Revenue at three of its four major business units fell in the most recent quarter, led by declines in investment banking due to fewer mergers and stock market floats.

Goldman shares fell three per cent this afternoon.

The figures

At the bank’s investing and lending arm, net revenue from equity securities fell 40 per cent from last year to $662m.

The bank’s net earnings applicable to common shareholders fell 27 per cent to $1.79bn in the quarter ending 30 September from $2.45bn over the same period last year. Earnings per share fell to $4.79 from $6.28.

Total net revenue fell six per cent to $8.32bn.

Why it’s interesting

Goldman benefited from investments in several high-profile Initial Public Offerings, including Tradeweb Markets, Avantor, Uber and Headhunter, which together made up 55 percent of the bank’s public investment portfolio.

Wall Street’s biggest banks are facing several challenges in boosting revenue, largely due to the ongoing US-China trade war and concerns about further interest rate cuts by the US Federal Reserve.

Under chief David Solomon, Goldman shifted its strategy from its focus on trading to building a bigger consumer business. 

This is a bid to shield its revenue from wild swings in financial markets.

Goldman, which recently launched a credit card with Apple, has also attempted to build out new businesses, but top executives at the bank have warned in previous quarters that those efforts will take time to bear fruit.

What Goldman said

“Our results through the third quarter reflect the underlying strength of our global client franchise and its ability to produce solid results in the context of a mixed operating environment,” Solomon said.

“We continue to execute on our strategic priorities, including investing in important growth opportunities in our existing and new businesses.”