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Crisis socks Goldman Sachs asset management with $152.4m loss

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Goldman Sachs recorded a US$96 million ($152.4 million) loss for its asset management business in the first quarter, as the group’s earnings nearly split in half year-on-year.

The US investment banking giant posted a US$8.7 billion ($13.8 billion) total net revenue for the three months leading to the end of March, slipping by 1 per cent from the first quarter a year prior and 12 per cent lower than the quarter before. 

However its net earnings of US$1.2 billion ($1.9 billion) had plummeted by 46 per cent from the previous year, while net earnings applicable to shareholders was down 49 per cent. Diluted earnings per share were US$3.11 ($4.95).

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The downfall was largely put down to a dragged result for the asset management segment, a drastic change from its US$1.7 billion ($2.7 billion) net revenues in the first quarter of 2019. 

A US$868 million ($1.3 billion) net loss in lending and debt investments had dragged Goldman Sachs’ asset management business, along with a US$22 million ($35 million) loss in equity investments. 

Goldman Sachs cited macro-economic concerns resulting from the “challenging operating environment [that] led to decreased global equity prices, wider credit spreads and uncertainty in the economic outlook.”

Lending and debt investments thus reflected losses across debt securities while equity investments showed significant net losses from public equities, along with lower net gains from private equities. 

But assets under supervision (AUS) in the asset management business had grown by 17 per cent from the year before to US$1.3 billion ($2 billion), the vast majority of the group’s AUS of US$1.8 billion ($2.8 billion).

Meanwhile, the investment banking, global markets and consumer and wealth management segments all grew. Investment banking produced net revenues of US$2.1 billion ($3.3 billion), up 25 per cent from the year before, and managing its second-highest quarterly performance. 

Global markets generated US$5.1 billion ($8.1 billion) in net revenues, up 28 per cent. It contributed 59 per cent of the group’s net revenue.

The consumer and wealth management division made US$1.4 billion ($2.2 billion), rising by 21 per cent. The wealth management portion in particular had made US$1.2 billion ($1.9 billion), an increase of 18 per cent.

Despite “high market volatility”, Goldman Sachs chairman and chief executive David Solomon has remained optimistic.

“Our quarterly profitability was inevitably affected by the economic dislocation,” Mr Solomon said.

“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.”

Around 98 per cent of the group’s global staff are working remotely as part of its contingency plan through the pandemic.

Goldman Sachs’ operating expenses were US$6.46 billion ($10.2 billion) for the quarter, 10 per cent higher year-on-year. 

Net provisions for litigation and regulatory proceedings for the first quarter of 2020 were US$184 million ($292.8 million), a sizeable rise from US$37 million ($58.8 million) the year before.

The board declared a dividend of US$1.25 ($1.98) per share, to be paid on 29 June.

 

Crisis socks Goldman Sachs asset management with $152.4m loss
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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