Goldman Sachs is looking to automation, technology and headcount reduction to streamline its operations.
The bank reported a 9% year-over-year increase in technology and communications spend to $482 million during the second quarter, while recording a 2% decrease in compensation and benefits to $3.6 billion, according to today’s earnings presentation.
WHY IT MATTERS: Goldman stressed automation and efficiency efforts during its February Investor Day and continued to invest in technology during the first half. It has reduced headcount by 3,000 since the start of 2023, according to the earnings supplement.
The $1.5 trillion Goldman’s headcount fell 5% YoY to 44,600 in Q2, according to the supplement. The reduction in personnel helps the company tackle inflationary pressure and reduce expenses, Chief Executive David Solomon said during the earnings call.
BY THE NUMBERS: In Q2, Goldman Sachs reported:
- Net revenues dropped by 8% YoY to $10.9 billion;
- Consumer deposits increased by 3% to $399 billion; and
- Net interest income dropped by 3% YoY to $1.7 billion.
NOTEWORTHY: Goldman is also looking to realign its products and narrow consumer ambitions by inching away from consumer banking as it looks to sell GreenSky, a home improvement loan providing platform, which it acquired for $1.7 billion in 2021, Denis Coleman, chief financial officer, said during the conference call.
GreenSky’s operations didn’t align with Goldman’s, Coleman said, and Goldman is looking to either sell the entire entity or its loan book.
WHAT THEY ARE SAYING: According to Zacks Equity Research, Goldman’s expenses are expected to rise in 2023 and 2024, by 1.2% and 4.9%, respectively, on the heels of “investments in technology and market development expenses for business expansion.”
STATE OF PLAY: Investment banking revenue dropped by 20% YoY to $1.4 billion as deal-making activities decreased during the quarter, Solomon said. The company also marked down its consumer banking portfolio by $504 million and real estate investments by $485 million, according to the company’s presentation.
“Our results were impacted by the challenging macro environment and in particular headwinds facing our specific mix of businesses,” Solomon said during the earnings call. “Activity levels in many areas of investment banking hover near decade-long lows and clients largely maintained a risk off posture over the course of the quarter.”
FUTURE LOOK: Solomon said the company has “a big project going on to make some investments that can create more automation and technology,” and the benefits will be felt “over time.”
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