Financial Performance

Goldman Profit Dives on Big Investment Losses

“We were on a good roll through January and February. Then came March," CFO Stephen Scherr says.
Matthew HellerApril 16, 2020

Goldman Sachs reported a 46% drop in first-quarter profit as losses from its investment portfolio amid the coronavirus-driven downturn overshadowed the strong performance of its trading division.

The bank’s profit fell to $1.21 billion, or $3.11 a share, from $2.25 billion a year ago. Revenue of $8.74 billion was basically flat from the first quarter of 2019.

Analysts on average had expected a profit of $3.35 per share, according to the IBES estimate from Refinitiv.

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Goldman’s balance sheet took a hit from $890 million in markdowns on stocks, bonds, loans and private-equity assets it holds on its balance sheet as investments and a provision of $937 million for possible losses on corporate loans. It had set aside $1.07 billion for loan losses in all of 2019.

Its asset management division posted a $96 million revenue loss in the first quarter, compared with a $1.79 billion gain a year earlier.

“We were on a good roll through January and February,” CFO Stephen Scherr told The Wall Street Journal. “Then came March.”

According to Scherr, revenue gains of about $1 billion on some real estate investments and sales of private-equity companies were zeroed out by $1 billion in losses, including a $180 million hit on shares Goldman owns of Avantor Inc., a listed health-care company.

As the WSJ reports, “The first three months of 2020 presented banks their most daunting challenges in more than a decade, with interest rates falling near zero and the global economy in free fall.” JPMorgan and Wells Fargo have set aside more than $10 billion between them to cover expected loan losses.

“For all of Goldman’s changes in recent years, which include an embrace of consumer lending and money management, the firm still leans heavily on its traders and investment bankers,” the Journal noted.

In the first quarter, revenue from Goldman’s trading division surged 28% to $5.16 billion as traders took advantage of higher market volatility and client activity. It was the division’s best performance in five years, accounting for nearly 60% of total revenue, compared with 40% for all of 2019.