Goldman's fourth-quarter profit fell 66% to $1.33 billion, well below Wall Street's expectations
Zerodha co-founder Nikhil Kamath has shared an advice for companies after reputed Wall Street firm- Goldman Sachs posted its worst earnings miss in a decade. Goldman's profit fell 66% to $1.33 billion in the fourth quarter, well below Wall Street's expectation.
The large investment bank pointed to a "significant decline" in completed mergers and acquisitions.
Zerodha's Kamath wrote on Twitter, "Deal-making is as good a forward indicator as any. 2023 could be a tough year everywhere," adding that 2023 is a time to "reduce leverage and diversify." Might be a good time.
Goldman Sachs reported its biggest earnings shortfall in a decade due to declining deal revenue and higher accruals on loan losses. Deal-making is as good a forward indicator as any. 2023 could be a tough year everywhere, perhaps a good time to reduce leverage and diversify.
— Nikhil Kamath (@nikhilkamathcio) January 17, 2023
He also wrote, "Sometimes (too often) the best thing to do is probably to do nothing".
Sometimes (a lot of times) the best thing to do is probably to do nothing.
— Nikhil Kamath (@nikhilkamathcio) January 17, 2023
Goldman Sachs' net income of $1.2 billion fell 69% to $10.6 billion after a 16% decline in revenue. In the fourth quarter, Goldman reported its fifth consecutive quarter of lower profit than the year-ago quarter.
Chief executive David Solomon admitted the results were "disappointing", but insisted the company had achieved double-digit returns for all of 2022.
The US investment-banking giant has also poured billions of dollars into its retail endeavor, which includes Apple Card and specialty-lending platform GreenSky. It has posted $3.8 billion in pretax losses over the past three years.
Executives highlight plans to pare down Goldman's ambitious consumer banking operations. He noted that lower spending will help results in 2023 after cutting 3,200 jobs earlier this month.
Investment banking fees declined 48% during the fourth quarter, a hit that was offset by a 44 percent increase in revenue associated with trading in fixed income, commodities and currencies.
The chief executive indicated a cloudy 2023.
Solomon said the dramatic decline in merger-related revenue reflected an extraordinary level of activity that was "not normal" in late 2020 and 2021 due to heavy fiscal stimulus.
That climate "led to a lot of activity," he said. "And then because of market disruptions, we have meaningfully tightened monetary conditions in 2022."
Goldman shares fell 6.4% in New York on Jan. 18, their biggest drop in a year.
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