Goldman Sachs (GS) CEO David Solomon said the Wall Street giant “is making a lot of progress, and we feel very good about where we are” as the company navigates a series of challenges in 2023.
Next year, he added while speaking at a Barclays conference in New York, “should be a better year for sure.”
Solomon is under pressure to improve Goldman’s results after reporting the firm’s lowest quarterly profits in three years. He is wrestling with everything from job cuts and a two-year-long investment banking slump to reports of partner unrest and questions about his leadership style.
Under Solomon, the bank is attempting a tricky retreat from a costly push into consumer lending while it waits out a tepid period of dealmaking.
The deal drought could end this fall with a new string of initial public offerings where Goldman is acting as one of the lead bankers, including IPOs from chipmaker ARM and grocery e-commerce company Instacart.
“It’s been quite a while since I could say to you we have a handful of very significant IPOs in the market. That’s an improvement,” said Solomon, adding that “there’s no question that the environment for capital markets activity is improving.”
But he also cautioned that it will take awhile yet to reach “normalized levels.” It may also take time for mergers to pick back up, which would also help lift Goldman’s results.
“Last summer, M&A activity shut down because there was enormous skepticism and concern about the economic environment,” he said. “There’s no question CEOs feel a lot better right now” and he predicted “an acceleration” of dialogue with companies.
But M&A “will lag the capital markets pick-up for sure.”
Solomon offered few hints on specific third quarter results beyond saying that “you will see some impairments and marks in commercial real estate but to a lesser degree than you saw in the second quarter.”
With respect to Goldman’s trading operations, Solomon said activity levels are “good” this quarter but that the comparison to the year-ago quarter will be “tough.” September, he said, also presents a “seasonal slowdown.”
“We have a few weeks to go and we’ll see where we come out.”
His rivals aren’t talking up results for the third quarter, either. JPMorgan Chase (JPM) CEO Jamie Dimon said Monday he expected trading revenue to be “down 1% or 2%” from the previous quarter and investment banking fees to come in “roughly equivalent to last quarter.”
Bank of America (BAC) CFO Alastair Borthwick suggested a significant decline in dealmaking from the previous quarter and year-ago period, of “probably 30-35%.”
The bank’s trading revenue, on the other hand, is on a better pace, expected to be up in the “low single digits” from last year, according to Borthwick.
From Morgan Stanley (MS), there was also a prediction of better times next year.
“We are more confident now than any time this year about an improved outlook for 2024,” Daniel Simkowitz, the bank’s head of investment management and co-head of corporate strategy, said at the Barclays conference Tuesday.
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