Goldman Sachs (GS) CEO David Solomon told analysts Tuesday that after five years as boss "I’ve never felt more optimistic about the firm." The new results released by the Wall Street giant make it clear that his challenges are far from over.
Third quarter profits fell 33% from a year ago as Goldman continued a costly retreat from consumer banking and tried to recover from a prolonged slump in dealmaking.
Earnings were dragged lower by a big write-down on GreenSky, a specialty lender it agreed to sell, and impairments on old real estate investments. The charges it took reduced pre-tax profits by almost $1 billion.
Its performance during the quarter trailed other big bank rivals JPMorgan (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC), all of which reported profit increases year over year.
Goldman's stock fell 1.6% Tuesday. Since Solomon became CEO, Goldman's stock has risen 40%, outpacing other Wall Street banks aside from rival Morgan Stanley (MS).
Solomon, who took over the top job in October 2018, has endured scrutiny all year long after wrestling with everything from job cuts and a global investment banking slowdown to reports of partner unrest.
He is trying to focus the firm around its traditional core strengths of assets and wealth management, trading, and investment banking.
That means getting out of some businesses, including consumer banking and mass market financial advice, and making the firm's asset-management unit less reliant on Goldman's own investments.
One analyst, Mike Mayo, challenged Solomon on a Tuesday conference call to describe who is "accountable" and "pays the price" for losses associated with GreenSky and the firm’s ill-fated foray into consumer banking. The firm has said its consumer-lending expansion cost the firm more than $3 billion since 2020.
Solomon said the leadership of the firm, which includes him, is "responsible and accountable for any decision that we make" and "I’m happy we’ve pivoted."
"We said we were going to do certain things. With hindsight you will do certain things differently. We obviously reflect, we learn from the things that we do, but I think it's important for companies to try things for companies to learn and adapt."
Another analyst, Dick Bove, told Yahoo Finance that "the company's problems are all associated with write-offs that they're taking in businesses that they're trying to extricate themselves from." He added: "I actually think Goldman Sachs is on the right path."
Solomon indicated that the bank will not so easily be able to exit its credit card partnership businesses with Apple and GM.
"Our partnerships with Apple and GM are long-term contracts, and we don't have the unilateral right to exit those partnerships, so our focus at the moment is on managing them better, getting rid of the drag, and bringing them to profitability, and we're making progress," he said.
Where Solomon was optimistic Tuesday was discussing Goldman's traditional Wall Street businesses. He pointed out that of four major companies that went public after Labor Day, Goldman was the lead bookrunner on three and joint lead bookrunner on the fourth.
“No other bank can make that claim,” he said.
Its investment banking fees of $1.5 billion were up 9% from the second quarter and up 1% from a year ago, driven mostly by an increase in its debt and equity capital markets businesses.
He did acknowledge, however, that there are a number of risks facing the US economy even though it "has proven to be more resilient than expected," ranging from higher-for-longer interest rates from the Federal Reserve to wars in Ukraine and the Middle East.
"Overall levels of risk are more elevated than we've seen in quite some time. While we don't know where this will all lead, it could impact economic growth and stability in the US and around the world, and we remain cautiously positioned."
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance