Goldman Sachs profit nearly halves as coronavirus hits investment
Profit at Goldman Sachs dropped more than 45 per cent in the first quarter of 2020 compared to a year earlier as the coronavirus slowdown hit the Wall Street giant’s asset management arm, its latest earnings report showed today.
Goldman’s net earnings for the January to March period were $1.21bn (£970m), down 46 per cent from last year’s $2.25bn figure.
The fall in profit took earnings per share down to $3.11, below the $3.35 analysts had been expecting and markedly lower than the $5.71 notched up last year.
The lender’s asset management arm swung to a loss as the spread of coronavirus triggered a collapse in share prices. Net revenue in the branch was minus $96m compared with $1.79bn for the first quarter of 2019.
Goldman’s bottom line was also hit by provision for credit losses. The lender said it had put aside $937m in the January to March period, up from $224m for the first quarter of 2019.
The bank said the increase was “due to significantly higher provisions related to corporate loans as a result of continued pressure in the energy sector and the impact of Covid-19 on the broader economic environment”.
Goldman’s chairman and chief executive David Solomon said: “Our quarterly profitability was inevitably affected by the economic dislocation.”
He added: “As public policy measures to stem the pandemic take root, I am firmly convinced that our firm will emerge well-positioned to help our clients and communities recover.”
A punishing recession in the US and around the world has caused financial pain for businesses and households. The International Monetary Fund yesterday predicted the US economy would shrink by 5.9 per cent this year.
Banks have been particularly hard-hit as customers default on their loans, markets crash and central banks have slashed interest rates – limiting the amount of money lenders can make.
Goldman’s Wall Street acolytes have also reported big falls in profit and soaring loan loss provisions.
JP Morgan yesterday said profit had plunged by more than two-thirds in the first quarter. The US’s biggest bank said it had put aside a colossal $7bn to protect it from a wave of potential loan defaults in the months ahead.
Bank of America today revealed that its profit had almost halved in the first quarter. It set aside $3.6bn for potential loan losses.