Goldman’s second-quarter profit falls on GreenSky writedown, dealmaking slump

July 19 (Reuters) – Goldman Sachs Group’s (GS.N) second-quarter profit fell as the Wall Street giant took a $504 million writedown tied to its GreenSky business, while the investment banking business took a hit from lower dealmaking volumes.

It reported on Wednesday a profit of $1.07 billion, or $3.08 per share, for the quarter ended June 30, compared to $2.79 billion, or $7.73 per share, a year earlier.

Ten straight rate hikes by the Federal Reserve have left the economy on a shaky ground, with many executives predicting a slowdown in the second half of the year.

That has prevented the market for mergers and acquisitions from roaring back to life even as it has begun to show some signs of recovery.

Investment banking fees for the quarter fell 20% to $1.43 billion. Trading revenue for fixed income, currency and commodities fell 26%, while equities trading revenue was broadly unchanged.

Greensky, which facilitates home improvement loans to consumers, was acquired by Goldman in September 2021 in a $2.24 billion stock deal, which closed a year ago.

CEO David Solomon told analysts in April that GreenSky is a “good business” but the bank might not be the “best long-term holder of this business” given its strategic priorities.

Goldman’s report rounds out a strong quarter for big U.S. banks, which pointed to a resilient economy but offered further evidence that high borrowing costs will begin to weigh on loan demand later this year.

On Tuesday, Goldman’s peer Morgan Stanley (MS.N) said its investment banking revenue was in line with last year, but the trading business had weakened.

Analysts are optimistic that an ongoing recovery in stock markets will encourage dealmaking and prompt more IPO hopefuls to list their shares in the coming months.

However, uncertainty about the trajectory of the economy continues to be a hurdle with global mergers and acquisitions (M&A) activity falling 36% from last year in the second quarter.

Goldman’s asset and wealth management unit brought in 4% lower revenue compared to last year.

Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Saeed Azhar in New York; Editing by Arun Koyyur

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