Goldman realigns business units as Q3 beats estimates

The firm reported net revenue of $11.98 billion and net earnings of $3.07 billion for the third quarter amid discussion of the bank's reorganization.

“Reprioritization” is now the top priority for Goldman Sachs as the bank announced plans to realign its business units, pulling back from its previous aspirations to target consumers.

Goldman Sachs shares spiked nearly 4% in midday trading Tuesday after the bank reported net revenue of $11.98 billion and net earnings of $3.07 billion for the third quarter ended Sept. 30. For the first nine months of the year, net revenue totaled $36.77 billion and net earnings were $9.94 billion.

Diluted earnings per common share were $8.25 for the third quarter, down 44.7% from the same period last year but still ahead of analysts’ consensus forecast of $7.69 per share.

On the firm’s third-quarter earnings call, Goldman CEO David Solomon unveiled plans, which had been widely reported Monday, to combine its expanded asset management and private wealth businesses into one unit run by Marc Nachmann. Goldman will also fuse its investment banking and trading operations under one group, while a smaller subset of the consumer-banking business that deals with corporate partners will emerge as a stand-alone entity called Platform Solutions run by Stephanie Cohen.

“It’s a purposeful shift playing to the strengths we have,” Solomon said. “We are strengthening our ability as a broad wealth platform.”

Solomon admitted that the bank is “narrowing our focus very clearly” after previously talking about grand plans to attract retail investors. However, he added that Goldman’s other business units were “functioning well” and that the consumer-directed businesses were “still small in the overall scheme of Goldman Sachs.”

As for its individual business unit results in the third quarter, Goldman’s global markets division generated quarterly net revenue of $6.2 billion, up 11% from last year’s third quarter, while investment banking revenue came in at $1.58 billion, down 57% from last year.

Also helping to dull the pain from the drop in banking fees was the firm’s soon to be realigned consumer and wealth management business, which generated record quarterly net revenue of $2.38 billion, 18% higher than in the third quarter of 2021. Net revenue in asset management was $1.82 billion for the third quarter of 2022, a 20% drop from the third quarter of 2021.

Operating expenses totaled $7.7 billion for the third quarter, 17% higher than for the third quarter of 2021 and 1% higher than for the second quarter.

On the topic of cost-cutting, a widely discussed subject on Wall Street heading into year-end bonus season, Goldman CFO Denis Coleman said that the bank is “actively engaged in expense mitigation” and that it’s “taking actions to reduce non-compensation expenditures.”

[More: Goldman plans to eliminate several hundred positions in new round of job cuts]