Goldman Sachs shares dropped 4% after CEO David Solomon warned the Wall Street giant is facing a $400 million hit from the exit of a credit card venture as well as recent weakness in trading revenue.
The Wall Street giant’s stock fell by just over $19 to $470 after Solomon told an industry conference in New York late Monday that the October quarter’s financial results will be hit by its exit from its consumer banking venture that began in 2022, including a joint credit card scheme with General Motors.
But the megabank’s top boss also said Goldman’s vaunted trading operation is facing “a more challenging macro environment, particularly in the month of August,” adding that “that business is trending down close to 10%”
“The combination of those things this quarter will likely have an approximately $400 million pre-tax impact, largely showing up in revenues,” Solomon told the Barclays forum on Monday afternoon.
He said investment banking activity “continues to be better” but declined to share expectations for the next financial results on Oct.15, adding that the US economy is in “reasonable shape.”
The company’s stock is, however, roughly up 27% this year close to a record high, with Goldman now focusing on its flagship deal-making unit and asset and wealth management to boost growth.
Wells Fargo analyst Mike Mayo wrote in a note that there was “the possibility that GS gave the bad news without giving the good news” in Solomon’s talk.
Solomon’s latest comments come after a first half of 2024 where investment banking has seen a rebound across Wall Street.
Goldman saw profits jump 61% compared to the same six-month stretch a year ago.
It is expected the Federal Reserve will cut rates in two weeks time that could boost corporate clients’ appetite further for top M&A transactions.
Last month, the firm announced plans to layoff 1,300 employees as part of its annual review to cull under-performers from its payroll.
It made cutbacks last year when deal-making was suffering with high interest rates making borrowing more expensive.
