‘they need to get their act together’

Goldman Sachs Group Inc (NYSE: GS) is down nearly 7.0% this morning on a significant year-over-year decline in its quarterly profit that fell shy of Street estimates.

Here’s what led to the weakness in Q4

The disappointing results were partly related to provision for credit losses that nearly tripled to $972 million in the fourth quarter – about 50% more than experts’ forecast as the Wall Street bank prepped for economic uncertainty ahead.   

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Two of its businesses: Global Banking & Markets, and Asset & Wealth Management were particularly hit this quarter. Investment Banking noted an annualised decline of 48% while Asset & Wealth Management tanked 27% versus a year ago, as per the earnings press release.

Nonetheless, Wall Street currently has a consensus “overweight rating on the Goldman Sachs stock.

Pro reacts to Goldman Sachs’ earnings report

In 2022, Goldman Sachs’ return on tangible common shareholders’ equity averaged at 11%; well below the bank’s medium-term target of 15% to 17%. On CNBC’s “Worldwide Exchange”, Christopher Whalen – Chairman of Whalen Global Advisors said:

I’ve said for many years, it’ll be a good idea for Goldman Sachs to buy a bank. Get some people that know how to run the bank side of the business because their performance in funding costs and credit costs is not impressive. They need to get their act together and the way to do that is go buy some core deposits.

The likes of KeyCorp, he added, would make up for a great acquisition for the multinational bank. Goldman Sachs stock is now back to the price at which it started the year 2023.  

Notable figures in Goldman Sachs’ Q4 results

• Earned $1.19 billion versus the year-ago $3.81 billion
• Per-share earnings also slipped from $3.32 to $10.81
• Revenue tanked 16% year-over-year to $12.64 billion
• Consensus was $5.56 a share on $10.75 billion revenue
• Operating expenses jumped a more than expected 11%

Last month, Goldman Sachs was said to be interested in lowering its global headcount by up to 8.0% as Invezz reported here.