Goldman Sachs profit plunges on impact from fintech sale, real estate bets

Oct 17 (Reuters) – Goldman Sachs’ (GS.N) profit fell in the third quarter, weighed down by an $864 million writedown on its GreenSky fintech business and its investments in real estate.

The Wall Street giant reported net profit of $2.06 billion, or $5.47 per share, for the three months ended Sept. 30, it said on Tuesday. That was lower than $3.07 billion, or $8.25 per share, a year ago.

Shares of the bank were marginally down in volatile premarket trading.

Goldman’s ill-fated foray into consumer banking proved costly, losing $3 billion over three years.

CEO David Solomon has shifted the firm’s focus back to its traditional strengths – investment banking and trading, and aims to grow in asset and wealth management.

“The work we’re doing now provides us a much stronger platform for 2024,” Solomon said. “I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive.”

The bank took a $506 million writedown on GreenSky, which facilitates home improvement loans for consumers and was sold to a consortium of investment firms led by Sixth Street Partners.

It was bought for $1.7 billion last year although it was valued at $2.2 billion when the deal was first announced in 2021.

Real estate investments were another drag on earnings as the bank booked an impairment charge of $358 million. That weighed on revenue from its asset and wealth management unit, which slipped 20% to $3.23 billion.

But investment banking offered some hope as fees at $1.55 billion was largely unchanged from last year as debt underwriting activity resumed and the market for initial public offerings picked up.

“I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive,” CEO Solomon said in a statement.

Investment banking results have been mixed for peers, with JPMorgan Chase (JPM.N) reporting a 6% decline in revenue, while Citigroup (C.N) said fees jumped 34%. Morgan Stanley (MS.N) is set to report its earnings on Wednesday.

The bank’s net revenue for fixed income, currency and commodities fell 6%, while equities rose 8%.

The U.S. Federal Reserve may raise interest rates one more time this year, while several bank executives have said they expected borrowing costs to stay higher for longer.

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