“I know that everyone needs solutions on this,” stated David Solomon, boss of Goldman Sachs, as he grew visibly exasperated by yet one more question about how briskly the financial institution may break even in its platform-solutions enterprise, house of its consumer-lending arm, which misplaced $1.7bn in 2022. “However I can’t reply that query.” The investor then tried flattery: “Goldman Sachs is world class in danger administration…while you make a nasty commerce you get out of it,” he stated, earlier than asking what extra the financial institution may do to cut back losses in platform options. “Thanks for the praise,” replied Mr Solomon, earlier than turning his again, strolling away and transferring on to the subsequent query. The auditorium, full of shareholders, analysts and media attending the agency’s investor day at its headquarters on February twenty eighth, stiffened.
The tense change displays the frustrations inside Goldman. Mr Solomon can level to metrics that present he has served buyers nicely sufficient. Since he took over in 2018 the corporate has posted an annualised complete return to shareholders of 13%—higher than the general market and nearly all of its rivals, aside from Morgan Stanley, its main rival, which managed to return 21% over the identical interval.
Mr Solomon argues it is because the agency has executed on most of the guarantees it made about its core companies three years in the past, at its first ever investor day, comparable to rising market share in investment banking, and beefing up belongings below administration. From this view, the obsession of analysts and media with mounting losses in platform options, which stays a tiny a part of the agency, is unmerited.
But the skirmish was additionally indicative of investor frustration. Though Goldman’s core companies have performed nicely, it has been such a wierd time for capital markets it’s exhausting to inform how a lot of the success will be replicated. The agency has struggled to convey down the worth of investments it makes utilizing its personal balance-sheet, which trigger wild swings in earnings. Platform options could also be a small a part of the enterprise, however prices are piling up. Losses doubled from 2021 to 2022, shaving two proportion factors off returns on fairness final 12 months.
At its investor day Goldman tried to reassure shareholders. This included mea culpas from Mr Solomon who stated Goldman did “an excessive amount of too quick” and grew into areas the place it “didn’t have a aggressive benefit”. The agency additionally made guarantees: Stephanie Cohen, head of platform options, stated scale would assist the enterprise attain revenue by 2025. Mr Solomon teased a sale, saying Goldman was exploring “strategic alternate options”. Later Bloomberg reported that Goldman may promote GreenSky, a home-improvements lender Mr Solomon acquired solely a 12 months in the past. These blended messages—vowing to develop the enterprise and eliminate components of it—appear to have confused buyers. The share worth sagged. On a day when the s&p 500 index of enormous American corporations shed simply 0.3%, shares in Goldman fell by almost 4%.
Behind Mr Solomon, as he answered investor queries, a display screen displayed the agency’s slogan for the day, the syntactically awkward “centered on the ahead”. The message buyers despatched again: not but. ■
