Goldman Sachs CEO David Solomon announced on Monday that the company expects a 10% decline in trading revenue for the third quarter of 2024. Speaking at a financial conference in New York, Solomon attributed the downturn to sluggish market conditions, particularly in August, which saw slower activity amid broader macroeconomic challenges. Despite this, Solomon remained optimistic about the long-term outlook for Goldman Sachs, citing several positive trends within the company’s investment banking and trading operations.
Challenging Market Conditions Lead to Decline
Solomon emphasized that the expected 10% decline in trading revenue was primarily driven by August’s poor performance in equity and bond markets. The third quarter downturn contrasts with Goldman’s strong performance in Q3 2023, when equities revenue grew by 8%. “Given a more challenging macro environment, particularly in the month of August, that business is trending down close to 10%,” Solomon stated.
Despite the slowdown, Solomon pointed out that other aspects of Goldman Sachs’ operations have remained robust, notably in investment banking, where certain sectors, such as debt underwriting and fixed-income trading, continue to thrive.
Rebound in Investment Banking Performance
Although trading revenue is expected to slip, Goldman Sachs has seen a significant rebound in investment banking activity. In Q2 2024, the company’s profits more than doubled, buoyed by increased dealmaking and strong performances in debt underwriting and fixed-income trading. Solomon expressed optimism about the future of investment banking, especially as the market for private equity-led deals is expected to recover towards the end of 2024 and into 2025.
However, Solomon refrained from making any specific predictions about the exact revenue outlook for investment banking, focusing instead on the overall positive momentum in this division.
Competitors Show Mixed Performance
At the same conference, Citigroup’s Chief Financial Officer Mark Mason reported that Citigroup expects its investment banking fees to rise by 20% in the third quarter compared to the previous year. While Goldman Sachs may be facing a slowdown in its trading business, it remains competitive within the investment banking sector, particularly as other Wall Street firms continue to post strong growth in this area.
Goldman Sachs’ Strategic Shift Away from Consumer Business
In line with recent trends, Goldman Sachs continues to reduce its exposure to the consumer business. The company is set to exit its credit card partnership with General Motors (GM), as part of a broader effort to shift away from retail banking operations. This strategy began in late 2022 and has been accelerated in 2024. Solomon noted that Goldman Sachs’ retreat from retail banking will result in an approximate $400 million pre-tax impact in the third quarter.
A source familiar with the matter revealed that GM is in talks with Barclays to form a new credit card partnership, replacing Goldman Sachs in the near future.
Steady Economic Outlook Despite Challenges
Despite the trading revenue challenges, Solomon concluded his remarks with a relatively optimistic view of the U.S. economy. He suggested that credit conditions remain stable, reflecting the broader economic resilience amid ongoing macroeconomic headwinds.
Goldman Sachs will be closely watched as the quarter unfolds, with investors eager to see how the company navigates the evolving market environment.
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