Goldman Sachs (GS) CEO David Solomon is still feeling good about 2024 compared to 2023, but he pointed to several points of caution about the storied Wall Street bank's third quarter — which may include a $400 million hit to pre-tax earnings from the consumer business and trading revenue falling 10% from a year ago.
Monday afternoon at a New York conference hosted by Barclays, Solomon laid out a number of expectations for Goldman's third quarter that may lessen momentum in what has so far been a phenomenal year for the firm.
"I feel very good about the way the firm's positioned," said Solomon. "There's no question we've made good progress."
But he cautioned that a number of Goldman's divisions may not be churning profits in the third quarter as much as they had over the first half of the year.
Solomon said the expectation for a 10% drop in trading revenue in the quarter compared to last year is largely due to its fixed-income trading.
"I think it's partially because [of] the disruption that occurred in August," he said in reference to the stock market's volatile swing in the first week of last month.
He also said parts of Goldman's consumer business — including its credit card partnership with GM that he is working to offload and its seller financing business — are expected to take a $400 million pretax hit to earnings.
The firm's asset management arm is also anticipated to see "significantly more muted" revenues for the quarter as it scales back the private equity and alternative investments it keeps on its balance sheet.
Solomon described the firm's investment banking activity as "better," but wouldn't share expectations for the firm's flagship dealmaking operations during his talk.
Goldman's stock rose 1.8% Monday but fell slightly during the after-hours session. The stock has seen robust gains year to date, rising 26% and outperforming all rivals outside of JPMorgan Chase (JPM).
Solomon's comments come after a first half of 2024 where investment banking has seen a healthy rebound across Wall Street—and Goldman saw profits jump 61% compared to the same six-month stretch a year ago.
That rebound reversed the firm's fate a year earlier, which will go down as David Solomon's most challenging as CEO. Along with the two-year slump in investment banking, Solomon was dealing in 2023 with a costly exit from consumer banking and a series of high-profile departures from the firm.
Goldman wasn't the only firm Monday that cited volatility and tough year-over-year comparisons in trading for downbeat third quarter results. Citigroup CFO Mark Mason said he anticipated total trading revenue to be “down roughly 4%” from a year ago.
In other Goldman news, the firm recently etched a minor win. Two weeks ago, the Federal Reserve slightly lowered its stress capital buffer requirement after the bank called for more information about its initial requirement, which was based on its annual large bank stress test results.
That marked the first time the regulator has relented to a bank's call for reexamination since the requirement was first established in 2020.
"We appreciated the fact that in our reconsideration, we got some relief from what was originally put forward. But I'd still say we are very, very engaged with our regulators around creating more transparency on this process," Solomon said.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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