Goldman (GS.US) CEO David Solomon on Monday warned that its trading revenue in the third quarter would decline 10% year-on-year due to the decline in its fixed-income business, which is trending down nearly 10% since more challenging macro conditions, especially in August.
Noting an improvement in trading activity, Solomon also pointed to some challenges facing the business, including a slowdown in dealmaking for acquisition companies.
The New York-based investment bank's shares have risen 28% this year, driven by a recovery in its main investment banking business. Solomon said the business was continuing to improve, despite a lack of a rebound in activity from institutions, and he hoped private equity-led deals would rebound by the end of this year and in 2025, declining to give a forecast for investment banking revenue.
Mark Mason, Citigroup's chief financial officer, said earlier in the day at the same conference that the bank expected investment banking fees to rise 20% year-on-year in the third quarter.
Notably, Goldman's trading division beat expectations in its Q2 earnings released in July, driving the investment bank's Q2 profit up 150%. Both fixed-income and equity trading businesses showed strong performances, and the rebound in capital markets helped the company achieve a good quarterly result.
So far, Goldman has been focusing on reducing its attention on consumer businesses. Solomon cited the bank's sale of loans to small and medium-sized enterprises and its plan to exit its retail business as of the end of 2022.
He said: "All these factors together could have a tax-preferred impact of about $400 million in the quarter, mostly in revenue."
A person familiar with the matter told Reuters in April that General Motors (GM.US) was in talks with Barclays to replace Goldman as its credit card partner.
He said at the same time that the US economy was in a "reasonable" state, indicating that credit conditions would remain relatively stable.