Goldman Sachs Group Inc.’s profit plunged as the Wall Street giant notched one of its weakest quarters under Chief Executive Officer David Solomon.
Second-quarter earnings fell 58% on an investment-banking slump, real estate markdowns and a goodwill writedown in the consumer business, which houses the GreenSky lending business. Return on equity, a key measure of profitability, slid to 4% — the worst among the top US banks.
Shares of the company fell 0.8% at 9:35 a.m. in New York.
Equity-trading revenue was one bright spot, coming in ahead of the firm’s major rivals at $3 billion, compared with estimates for $2.47 billion. Goldman has now clinched the top rank in that business in three of the past four quarters.
The asset-and wealth-management business posted revenue of $3.05 billion, down 4% from a year earlier and below analysts’ estimates for $3.5 billion. The unit was buffeted by the bank’s exposure to the real estate sector, with writedowns both on its lending portfolio and its equity investments contributing to a $1.15 billion pretax earnings hit tied to principal investments.
The bank also reported a jump in operating expenses due to how it accounts for impairments tied to some of its consolidated real estate investments as well as the goodwill writedown. The impairments totaled about $1 billion.
Another noticeable drag on earnings was the jump in taxes tied to non-US earnings. That bumped up the firm’s effective tax rate to 22.3% so far this year, up from just 19% at the end of the March.
Revenue dropped 8% to $10.9 billion, compared to analyst estimates of $10.5 billion. Total assets under supervision increased to a record $2.71 trillion, up from $2.67 trillion as of March 31.