Goldman Profit Down 58% On GreenSky Goodwill Write-Down, Real Estate Investments

Goldman Sachs (GS) net earnings plunged 58% in the second quarter of the year as it wrote-off goodwill for its GreenSky consumer lending platform and marked down real estate investments all while investment bank dealmaking—a big source of its fee revenue—slowed down.

Goldman's Failed Retail Strategy Woes Continue

Losses in Goldman's consumer business brought down profits to near three-year lows, setting the firm on track for one of its worst quarterly performances under CEO David Solomon.

The drop stemmed in part from the $504 million write-down of goodwill related to GreenSky, a platform for home improvement consumer loans that Goldman acquired for $2.24 billion in 2021.

The acquisition was part of a retail push by Goldman that hasn't quite worked out for the bank. That has led Goldman to divest from more than just the GreenSky platform. The bank completed the sale of its unsecured loan portfolio at Marcus—its retail-focused bank—for a gain of about $100 million.

Why Does This Matter?

Despite the gain from the sale of Marcus loans, the goodwill write-off for GreenSky and a $485 million impairment of real estate investments under its assets and wealth management business dragged down Goldman financials.

Those three items alone brought down Goldman's net earnings by $1.4 billion, its earnings per share by $3.95 and its return on equity (ROE)—a key metric of a bank's profitability—by 5.2 percentage points, and setting it on track for one of the weakest quarterly performance under CEO David Solomon.

Investment banking fees fell 20% compared to the second quarter of last year due to a slowdown in the number of deals.

The Wall Street giant's ROE, a key metric of a bank's profitability, slid to 4%, making it one of the worst among top U.S. banks.

However, there were some bright spots. Rising markets lifted assets under supervision of Goldman's assets and wealth management division to a high of $2.71 trillion and the company earned a record management and other fees of $2.35 billion.

Goldman's shares were up 1% in trading. However, its executive took some pains earlier this month to prepare investors for disappointing results, perhaps preventing a big stock movement.