Goldman Sachs shares fell 4% after the bank's CEO, David Solomon, warned that the Wall Street giant faces a $400 million loss due to its exit from the credit card business and a recent slump in trading revenue.
Shares of the Wall Street giant fell more than $19 to $470 after Solomon told an industry conference in New York late Monday that its October-quarter results would be hurt by an exit from its consumer banking business starting in 2022, which includes a joint credit card plan with General Motors Co.
But the megabank's chief also said Goldman's vaunted trading business “faces a more challenging macro environment, particularly in August,” adding that “that business is trending down by nearly 10 percent.”
“The combined effect of these factors in the current quarter could be a pre-tax impact of approximately $400 million, the majority of which will be reflected in earnings,” Solomon said at Barclays Forum on Monday afternoon.
He said investment banking “remains strong” but declined to provide an estimate for when the bank reports its next quarterly earnings on Oct. 15, adding that the U.S. economy is in “fair shape.”
But with its shares up about 27% this year and near all-time highs, Goldman is now focusing on its core trading division and asset and wealth management to fuel growth.
Wells Fargo analyst Mike Mayo wrote in a note that Solomon's speech “may have led Wells Fargo to deliver bad news instead of good news.”
Solomon's latest comments come in the wake of a recovery in investment banking across Wall Street in the first half of 2024.
Goldman's profits rose 61% from the same period a year ago.
The Federal Reserve is expected to cut interest rates within the next two weeks, which could further increase corporate clients' appetite for major M&A deals.
The company last month announced plans to lay off 1,300 employees as part of an annual review to remove underperforming staff from the payroll.
The company made the cuts last year when high interest rates increased borrowing costs and made trading difficult.
