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Goldman Sachs Lost $3 Billion on Consumer Lending Push

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Goldman Sachs Group Inc.

GS 1.10%

said a big chunk of its consumer lending business has lost about $3 billion since 2020, revealing for the first time the costly toll of the Wall Street giant’s Main Street push. 

Ahead of fourth-quarter earnings next week, Goldman released financial information that reflects its new reporting structure. The bank in October announced a sweeping reorganization that combined its flagship investment-banking and trading businesses into one unit, while merging asset and wealth management into another.

Marcus, Goldman’s consumer-banking arm, launched in 2016 to a strong start.

Rivals

JPMorgan Chase

& Co. and

Bank of America Corp.

were posting big profits on the back of strong consumer businesses that carried them through rocky stretches in their Wall Street operations. Goldman, long reliant on its gold-plated investment banking and trading arms, wanted in on the action.

The bank rolled out savings accounts, personal loans and credit cards. Its 2019 credit-card partnership with

Apple Inc.

signaled its ambitions to be a big player in the business.

Goldman invested billions of dollars in Marcus. But it struggled to bulk up the credit-card business following an early win with the Apple Card. A long-awaited checking account never materialized.

Economists and financial analysts look at bank earnings to get a sense of the economy’s health. WSJ’s Telis Demos explains how inflation as well as recession concerns can be reflected in their results. Illustration: Lorie Hirose

The consumer unit was never profitable. In October, Goldman formally scaled back its plan to bank the masses.

The reshuffling parceled out the consumer business to different parts of the bank.

Before the shift, it was under the same umbrella as Goldman’s wealth-management division. 

Much of Marcus will be folded into Goldman’s new asset and wealth management unit. Some pieces, including its credit-card partnerships with Apple and

General Motors Co.

, as well as specialty lender GreenSky, are moving into a new unit called Platform Solutions.

Goldman on Friday disclosed that its Platform Solutions unit lost $1.2 billion on a pretax basis in the nine months that ended in September 2022. It lost slightly more than $1 billion in 2021 and $783 million in 2020, after accounting for operating expenses and money set aside to cover possible losses on loans. The unit also includes transaction banking, with services such as enabling banks to send payments to each other, vendors and elsewhere.

Goldman shares closed up about 1% Friday at $374.

The bank said it set aside $942 million during the first nine months of 2022 for credit losses in Platform Solutions, up 35% from full-year 2021. Operating expenses for the division increased 27% during this period. After hovering around record lows for much of the pandemic, consumer delinquencies are rising across the industry.

Net revenue for Platform Solutions’ consumer platforms segment, which reflects credit cards and GreenSky, totaled $743 million during the first nine months of 2022, up 75% from all of 2021 and up 295% from 2020. Goldman completed its acquisition of GreenSky last year. 

The disclosure didn’t reveal financial details for Goldman’s consumer deposit accounts, personal loans and other parts of Marcus. Those business lines are included in the firm’s asset and wealth management division, which is profitable, and aren’t material to the firm’s overall profits, according to people familiar with the matter. 

Goldman is in the process of winding down personal loans, according to people familiar with the matter. It will be ending its checking account pilot for employees, one of the people said, while it considers other ways to offer the product. One possible option is pitching the checking account to workplace and personal-wealth clients.

As recently as the summer, Goldman executives were saying the checking account would unlock new business opportunities for the bank. 

Marcus has been a divisive topic at Goldman. Some partners, senior executives and investors were against continuing to pour billions of dollars into the effort, in particular for checking accounts and other products that Goldman would be developing on its own.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Charley Grant at charles.grant@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Exclusive: Goldman Sachs on hunt for bargain crypto firms after FTX fiasco

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LONDON, Dec 6 (Reuters) – Goldman Sachs (GS.N) plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.

FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.

“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.

Its CEO David Solomon told CNBC on Nov. 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalized.

Rivals are more sceptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley (MS.N) CEO James Gorman said at the Reuters NEXT conference on Dec. 1.

HSBC (HSBA.L) CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.

‘TRUSTED’ PLAYERS

The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion on Dec. 5.

The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalized counterparties.

“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”

Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.

Others also see the crypto meltdown as a chance to build their businesses.

Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.

Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said

“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”

Reporting by Iain Withers and Lawrence White, Editing by Lananh Nguyen and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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Business

Goldman Sachs pulls back from retail banking in latest overhaul

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Goldman Sachs said it was pulling back from its highly touted foray into retail banking to focus more on its traditional strengths serving big corporations and wealthy investors as part of a major reorganisation under chief executive David Solomon.

Solomon said the Wall Street powerhouse was trying to align its online retail bank operations with its wealth management business, adding that was “a better place for us to be focused than to be out massively looking for consumers”.

“The concept of really being broad with a consumer footprint is not really playing to our strengths,” he told CNBC. “But when you look at our wealth platform . . . the ability to add banking services to that and align it with that actually plays to our strength.”

Goldman announced its restructuring as it reported third-quarter net income of $3.1bn, or $8.25 a share, down 43 per cent from $5.4bn, or $14.93 a share, a year ago. That beat analysts’ estimates for $2.9bn, or $7.75 a share, according to consensus data compiled by Bloomberg, but was still the group’s fourth straight quarterly decline.

“The scaling back of consumer makes sense,” said Christian Bolu, banking analyst at Autonomous Research. “It’s a case of really focusing on existing clients, which probably are very high value, high net worth . . . rather than spending the money to go chase new clients.”

Under the revamp, Goldman will fold its trading and investment banking business into one unit as it shrinks from four divisions to three. The plan was announced as the Wall Street bank deals with a prolonged slowdown in investment banking fees.

“These organisational changes represent an important and purposeful evolution in our strategic journey, positioning us well to deliver for our clients and unlock shareholder value,” Solomon said in a memo to employees that was seen by the Financial Times.

The move reflects the reality that Solomon has yet to convince investors that Goldman has changed substantially from the investment banking and trading-driven house that he inherited four years ago, and merits a superior stock market multiple.

The reorganisation, the bank’s second in less than three years, will break Goldman’s consumer business into two separate areas, reducing the prominence of its push into consumer banking through online retail lender Marcus. Since its launch in 2016, Marcus has come under scrutiny from investors and internally following years of losses and escalating costs.

The three divisions will be: a merged investment bank and trading unit; an asset and wealth management division that will house Marcus; and the newly formed Platform Solutions business comprising the rest of Goldman’s retail banking operations, such as its Apple credit card partnership and online lender GreenSky, as well as the fledgling transaction banking business.

Goldman shares was up more than 2 per cent in midday trading in New York.

In the third quarter, the group’s net revenues totalled $11.98bn, down from $13.6bn a year earlier but ahead of analysts’ forecasts for $11.4bn. Revenues from its trading division, which has benefited from heavy activity during the recent market volatility, came in ahead of analysts’ estimates.

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Business

Peloton Co-Founder John Foley Faced Repeated Margin Calls From Goldman Sachs as Stock Slumped

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John Foley,

the co-founder and former chief executive of

Peloton Interactive Inc.,

PTON -3.41%

faced repeated margin calls on money he borrowed against his Peloton holdings before he left the fitness company’s board last month, according to people familiar with the situation.

As Peloton’s shares slumped over the past year,

Goldman Sachs Group Inc.

GS -2.11%

asked Mr. Foley several times to provide fresh funds or additional collateral for personal loans the bank had extended to him, the people said. The company’s share price has fallen nearly 95% from its $160 peak in December 2020.

Resigning from the board gave Mr. Foley flexibility to sell or pledge more Peloton shares, though he said the margin calls weren’t the reason he left the company.

“I didn’t resign from the board because I was underwater,” he said. “To the extent that I took on debt through Goldman, it was because I am bullish on Peloton and still am. It was and is a great company.”

The former chairman and CEO had pledged as collateral about 3.5 million Peloton shares as of the end of September 2021, or about 20% of his stake at the time, securities filings show. The pledged shares were worth more than $300 million a year ago. At current prices, they are worth roughly $30 million.

Peloton has cut thousands of jobs this year to stem its losses.



Photo:

John Smith/VIEWpress/Getty Images

Mr. Foley was able to secure private financing and avoid stock sales by Goldman, the people said. He declined to say on Monday how much of his current stake had been pledged or how much he had borrowed against his holdings.

His seat on the board limited his ability to raise additional funds because most public companies prohibit directors and executives from selling their shares during certain trading periods. In addition, Peloton’s policy limits pledges for margin loans by directors or executives to 40% of the value of an individual’s shares or vested options.

Mr. Foley’s decision to leave the board on Sept. 12 followed a tumultuous several months at the company he co-founded a decade ago, as well as a sharp decline in his personal wealth as Peloton’s sagging fortunes diminished the value of his holdings. His stake in the company, worth $1.5 billion a year ago, is currently worth less than $100 million.

“Everyone can see I had a rocky year,” Mr. Foley said. “This was not a fun personal balance-sheet reset.”

Barry McCarthy, a Silicon Valley veteran, became Peloton’s CEO in February.



Photo:

Angela Owens/The Wall Street Journal

In February, Mr. Foley stepped down as Peloton’s CEO and was succeeded by

Barry McCarthy,

a former

Netflix Inc.

and Spotify Technology SA executive. Mr. Foley kept his position as Peloton’s executive chairman and continued to hold a controlling stake in the company through Class B shares with 20 votes apiece.

A few weeks later, Mr. Foley reported selling $50 million worth of Peloton shares in a private transaction. At the time, Peloton said the sale was part of the executive’s personal financial planning. The sale left him and his wife,

Jill Foley,

a former Peloton executive, with 6.6 million shares and options on another 8.4 million, according to securities filings, which combined are currently worth less than $100 million. He hasn’t reported any stock or option sales since March. Business Insider reported in March that Mr. Foley was in discussions with Goldman about restructuring his personal loans.

Peloton’s business deteriorated throughout the spring and summer, with the company in August reporting a $1.2 billion loss and the first ever quarter in which its subscriber numbers failed to grow. The company has cut thousands of jobs this year to stem its losses, including a round of layoffs unveiled last week.

Mr. Foley’s 10-year tenure as CEO was marked by rapid growth and sometimes lavish spending. He took heat from Peloton employees last December for hosting a black-tie holiday party that included some of the company’s celebrity instructors weeks after implementing a hiring freeze. Pictures circulated on Instagram of gown-clad instructors dancing at New York’s luxury Plaza Hotel. Mr. Foley acknowledged on social media that the event caused “frustration and angst” among employees.

Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds

That same month, Mr. Foley paid $55 million to purchase an oceanfront mansion in East Hampton, N.Y., according to real-estate records and people familiar with the transaction. He and Ms. Foley in September put their Manhattan penthouse up for sale. The property, last priced at $6.5 million, is in contract to be sold, according to listings website StreetEasy.

Margin loans, or borrowing against portfolios of stocks and bonds, come with the risk that a broker can call for additional cash or collateral to meet the minimum equity required if a security’s price drops too low. Sharp drops in stock prices during the 2000 dot-com burst and the 2008 financial crisis generated margin calls for executives at well-known companies.

John Foley paid $55 million to purchase this oceanfront mansion in East Hampton, N.Y.



Photo:

PICTOMETRY

Peloton requires directors, executives and employees to get approval for pledging their shares as collateral for margin loans. Other Peloton executives also have pledged some of their Class B holdings, and in the annual report Peloton filed last month, the company warned that investors could be harmed if its stock fell and executives were forced to sell shares.

Goldman has worked closely with Peloton, including when Mr. Foley was the CEO. The investment bank was one of the lead underwriters of the company’s initial public offering in 2019. Goldman bankers also co-led a $1 billion stock offering in November 2021.

Investors initially soured on Peloton—its shares fell 11% the day they made their debut at $29. The stock surged in 2020 during the onset of the Covid-19 pandemic, giving the company a peak market value of $50 billion and making Mr. Foley a billionaire on paper. The shares closed down 3.4% Tuesday at $8.78.

—Theo Francis

and Katherine Clarke contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Stocks to Buy for Cash Flows Despite Fed Rate Hikes: Goldman Sachs

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  • Higher interest rates mean a grimmer economic outlook and a further drag on the stock market. 
  • Goldman Sachs lowered its 2022 projection for the S&P 500. 
  • The firm says quality, short-duration stocks will outperform long-duration. 

On Wednesday, the Federal Open Market Committee raised its key interest rate by 75 basis points for a third straight time. 

Their decision lifted the fed funds rate to a range between 3% and 3.25%, the highest since early 2008. And, their median forecast is that this rate will be at 4.4% by the end of this year.

As the fight to squash inflation continues, Wall Street is coming to terms with what higher rates could bring besides less inflation: lower consumer demand that slows the economy, and weaker stock prices. On Friday, concerns about the Fed’s rate hikes pushed the S&P 500 towards its lows of the year.

A day earlier, Goldman Sachs equity strategists cut their year-end target for the index from 4,300, which it hit mid-August, to 3,600.

“The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast,” strategists led by David Kostin said in a note.

One of those outcomes is a so-called hard landing in which higher rates trigger a recession. That scenario could see the S&P 500 plunge to 3,400 by year-end, and 3,150 by the end of the first quarter, Kostin said.

A low unemployment rate is signaling that consumer incomes and spending could increase by next year. This scenario would keep inflation elevated and lead the Fed to hike rates further than current projections, he said. 

He added that based on the team’s conversations with clients, a majority of equity investors now believe a hard landing is inevitable. What’s still unclear is the timing, magnitude, and duration of a potential recession. Most portfolio managers estimate that a recession could hit the US economy sometime in 2023, according to Kostin.

His team now recommends defensive positioning in light of the unpredictability. Investors should focus on stocks that have strong balance sheets, high returns on capital, and stable sales growth.

Rising interest rates also mean short-duration stocks, those that generate a larger share of their cash flows in the near future, will outperform their long-duration peers, Kostin said. That’s because stocks with cash flows pegged to the distant future are more sensitive to interest rates, he added.

Below is a list of 26 stocks that Goldman added to its newly rebalanced basket of short-duration stocks.

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Business

Goldman Sachs cuts 2023 outlook for US growth

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Satori Fun founder reacts to FedEx warning of a global recession, telling ‘The Claman Countdown’ our economic situation is due in part to the Fed initially ignoring the worst inflation in 40 years. 

Goldman Sachs sees the Federal Reserve acting aggressively to tighten monetary policy through the rest of the year.

That has Goldman cutting its U.S. Gross Domestic Product for 2023 and sees the unemployment rate rising higher than previously expected.

In a note released late Friday, Goldman now sees GDP growth of 1.1% next year, down from its prior call for 1.5% growth from the fourth quarter of 2022 to the end of 2023.

The Federal Reserve has shaken the markets as it implements huge rate hikes in an effort to moderate the steepest inflation in 40 years. 

BIDEN SAYS DEAL AVERTING RAIL WORKER STRIKE AVOIDED ‘REAL ECONOMIC CRISIS’

The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City. (REUTERS/Andrew Kelly/File Photo / Reuters Photos)

The Fed meets again this week and another big interest rate hike is on the table, after the consumer price index report came in hotter than expected.

Goldman now expects a 75 basis point hike, up from 50 basis points previously and sees 50 bp hikes in November and December, with the fed funds rate peaking at 4-4.25% by the end of the year.

The Federal Reserve building in Washington. (AP Photo/Patrick Semansky, File / Associated Press)

VOLATILE MARKETS SENDING INVESTORS RUNNING FOR REFUGE

“This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” Goldman wrote.

CLICK HERE TO READ MORE ON FOX BUSINESS

Someone completing an unemployment benefits form. (iStock / iStock)

The projection for the unemployment rate is to rise to 3.7% by year-end, up from 3.6%, and rising to 4.1% by the end of 2023, from 3.8% previously.

Reuters contributed to this report.

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Business

Finger-pointing among execs begins at Goldman Sachs

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Talk about passing the buck.

With Goldman Sachs in something of a pinch, the finger-pointing between top execs has begun — and, unsurprisingly, it has turned nasty almost immediately.

The Wall Street giant announced this week that it would slash jobs with earnings in a slump — and even said that it is taking away free office coffee.

Some c-suite sourpusses say that the company under the leadership of CEO David Solomon is too focused on flashy executives with “personal brands,” rather than knuckling down to the good old-fashioned hard work of making rich people richer with very little effort.

Insiders seem to be having a harder time seeing the fun side of Solomon’s own DJing career as DJ D-Sol now that the economy is in a spin.

We’re told that top execs are less tickled by Solomon’s sideline as a DJ now that the economy is looking more grim.
FilmMagic for Sports Illustrated

Meanwhile there’s much grumbling about Solomon’s soft spot for rock star bankers  — for example Kim Posnett, who has rocketed through the ranks in recent years, and is often to be seen speaking on panels, attending galas and sitting for interviews, while — the (ahem, male, ahem) insiders claim — many of her actual deals have fallen flat. (We should note that for all her alleged “personal branding,” Posnett has all of about 1500 Instagram followers, so Charli d’Amelio probably isn’t sweating it just yet).

The Wall Street giant has this week announced company-wide layoffs.
Getty Images

According to the New York Times, the firm reported second quarter earnings of  $2.93 billion, nearly half as much as the same quarter last year. The investment division where Posnett works — though, we hasten to add, not just Posnett works — was responsible for much of the downturn, earning 41% less in that time than the previous year. (We would be remiss if we didn’t note that Goldman Sachs’ executive team is reportedly around 80% male, so you’d think the number crunching know-it-alls over there would figure out that if something’s amiss, the raw data suggests its overwhelmingly likely to be the guys’ fault.)

Some insiders have even been making a racket because Posnett spent much of last week in a suite at the US Open as the company was preparing to announce the  layoffs, rather than, say, at her desk trying to make the balance sheet look a little more rosy next quarter. (For the record, though, Page Six has seen a deal or two go down over $15 beers between sets out at Arthur Ashe Stadium so let’s not rule out an, er, net profit from those outings just yet).

A spokesperson called the barbs “baseless gossip.”



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Business

Goldman Sachs yanks ‘free coffee’ perk as bankers return to five-day week

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It’s time for Goldman Sachs bankers to wake up and smell the coffee — and pay for it, too.

As employees filed into the Wall Street giant’s headquarters in lower Manhattan last Tuesday for a mandatory return to a five-day work week, they got an unwelcome surprise: The “free coffee” station had been wheeled away, sources told The Post.

The complimentary “grab and go” station at the entrance of 200 West St. — cold-brew, as well as stashes of French vanilla creamer, almond milk, soy milk and half-and-half — had appeared during the pandemic to encourage attendance, according to insiders.

But the brass has since determined it doesn’t need sweeteners to get people back to the office, sources told The Post. Instead, management now believes the threat of getting fired should more than enough incentive, the sources said.

“RIP to another pandemic perk for junior bankers,” one junior Goldman banker lamented. “I’m sure the partners still don’t have to pay for their coffee — or anything in their fancy dining hall.”

“Of course they took the coffee away,” another junior banker added. “But I’ve been so slammed since Labor Day I haven’t really had time to think too much about it.”

Natural gas prices are displayed in front of Morgan Stanley in the Times Square neighborhood of New York.
Bloomberg via Getty Images

As for coffee, a source close to the bank notes there is still free drip coffee elsewhere in the building, including at the building’s “Sky Lobby” on the 11th floor. The source added the bank also provided cupcakes to employees on their first day back. Still, junior employees counter that it’s a hassle to get to and doesn’t have the same quality of cold brew.

At other banks on Wall Street, executives and CEOs are embracing the return to normalcy — and the disappearance of perks that many had long taken for granted.

At Goldman as well as rivals JPMorgan an Morgan Stanley, bankers at all levels are lamenting the loss of free tickets to the US Open tennis championship in Forest Hills, Queens. Before the pandemic, the big banks typically made extra tickets available to top performers. But this year, the only way to nab a seat is to bring a client, sources add.

Spokespeople at JPMorgan and Morgan Stanley declined to comment on the US Open perks.

JPMorgan CEO Jamie Dimon, for his part, has grown increasingly aggressive with a clampdown on remote work, privately telling senior managers he expects the rank and file to be at the office five days a week — a more stringent standard than the bank’s official line of three days a week, according to sources close to the company.

But it’s Goldman CEO David Solomon — who famously called working from home an “aberration” — who has signaled the return to office with particular force. As first reported by The Post, Goldman told workers in a memo last month it planned to lift all COVID protocols a week after Labor Day — a sign it won’t accept excuses for employees to work from home.

In April, Solomon ended free daily car rides to and from the office, which the bank had begun offering at the start of the COVID outbreak, The Post was first to report. It now limits the perk to employees who work well into the evening, sources said.

Workers at Goldman Sachs filed into 200 West Street last week.
Bloomberg via Getty Images

This spring, Goldman likewise announced that employees will once again be on the hook for the cost of breakfast and lunch.Goldman did hike its meal allowance for dinner to $30 from $25 — two months after The Post reported staff were griping they couldn’t even buy a Chipotle dinner with the stingy stipend.

For some employees, however, part of Goldman’s allure is the prestige of working long hours in addition to getting face time with the boss.

“There’s a pride that comes with working crazy hours — and Goldman thinks the best will want what Solomon is demanding,” John Breault, CEO of recruiting firm Breault & Smith told The Post.

Other banks have taken a more relaxed approach to returning to the office. Citigroup CEO Jane Fraser — who famously banned Zoom meetings on Fridays in response to employee fatigue — has refrained from requiring a five-day work week although the bank asked most employees to return at least a few days a week in March.

Bank of America CEO Brian Moynihan, meanwhile, has said he will give more guidance about returning to the office in the next six to eight weeks — and will outline “more formality to the flexibility.”

Not all of the rank and file are convinced.

“Citibank and Bank of America are the lame banks,” one 20-something Wall Street banker who works at a boutique firm told The Post, adding he’d never take a job there.

Still, some of the young bankers who have landed prize gigs at Goldman and JPMorgan say they wish they had more flexibility.

“I’d prefer not to be in the office five days a week,” one junior banker conceded.

“I don’t think anyone wants to be in the office five days a week,” a former Goldman employee, who left to find a more flexible role, told The Post.

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Madcap Markets Push Goldman Sachs To Higher Trading Revenue, but Profit Falls

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Goldman Sachs Group Inc.

GS 2.51%

said Monday that second-quarter earnings fell 47%, capping an earnings season where weak and volatile markets crimped investment banking revenue across the industry but boosted trading.

But what was bad for investment bankers was good for traders. Widespread volatility meant investors placed more trades across a variety of asset classes, and banks took advantage. At Goldman, second-quarter trading revenue rose 32% to $6.5 billion. The other banks also reported big increases in trading revenue.

However, all the major U.S. banks reported double-digit declines in profit, and most of them missed analysts’ expectations. Year-ago results were juiced by reserve releases across the industry, when the banks let go of some of the money they had socked away for pandemic losses.

This year so far has marked a comedown from what had been near-perfect conditions for Wall Street at the height of the pandemic. The stimulus from governments and central bankers in response to Covid led to a swift recovery from a recession and ebullient capital markets. The effects of the pandemic also led to changes in how customers and businesses operate, which sent corporate chieftains on a deal making spree.

The current environment is far less friendly. The highest inflation in decades, sharply higher interest rates, and significant geopolitical concerns have sent markets for a loop, with the S&P 500 recently finishing its worst first half in more than 50 years. That uncertainty has given corporate executives pause about taking their companies public or selling additional stock.

Likewise, the U.S. economy has been flashing disparate signals about its health. The finances of U.S. consumers and businesses remain relatively strong. Executives at Bank of America, which also reported second-quarter results on Monday, said their customers were spending and borrowing at a strong clip.

But higher costs for groceries, gas and rent are hurting many consumers, and U.S. households have started spending some of the savings they accumulated during the pandemic. Bank executives across the industry are concerned about a possible recession, although they haven’t seen clear evidence of one just yet.

Goldman CEO David Solomon noted conflicting signals on the inflation outlook.



Photo:

patrick t. fallon/Agence France-Presse/Getty Images

Goldman CEO

David Solomon

pointed to conflicting signals on the inflation outlook Monday. He said the bank’s corporate clients continue to experience persistent inflation in their own supply chains, but added that the firm’s economists expect inflation to slow in the rest of the year.

Goldman’s second-quarter profit fell to $2.9 billion from $5.5 billion a year ago. Revenue fell 23% to $11.9 billion, though both beat the expectations of analysts polled by FactSet.

Bank of America’s profit fell 32% to $6.2 billion and revenue rose 6% to $22.7 billion.

Goldman shares rose 2.5%. Bank of America shares were roughly flat.

Within the investment banks, stock-selling businesses were hit especially hard. In 2021, companies raced to go public via initial public offerings and blank-check companies known as SPACs. That activity has ground to a halt so far this year.

Goldman is planning to slow its hiring pace in the second half of the year, after staffing up for the pandemic deal making boom. The bank had 47,000 employees at the end of June, up from about 41,000 a year ago. Finance chief

Denis Coleman

also said the bank would bring back annual performance reviews for its workers, a practice Goldman had mostly suspended during the pandemic.

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More coverage and analysis on the latest financial results from Wall Street

Citigroup executives said last week they expected the slowdown to be temporary and wouldn’t change their pace of hiring more investment bankers. “You’re going to see us take a strategic look at this and a long-term look rather than just a shooting from the hip on the expenses side, because we’re building the firm for the long term here,” CEO

Jane Fraser

said.

At Bank of America, where total investment banking revenue fell 46%, Chief Financial Officer

Alastair Borthwick

said investment banking would “rise back to more normal levels in the next few quarters when economic uncertainty becomes more muted.”

Total trading revenue grew 25% at Citigroup, 21% at Morgan Stanley, 15% at JPMorgan and 11% at Bank of America. Goldman’s 32% jump was powered by a big rise in fixed income, currencies and commodities.

JPMorgan generated more trading revenue than any second quarter except during the middle of the pandemic and notched its best-ever second quarter for equities trading.

“Trading markets whipsawed with each release of economic data during the quarter,”

Daniel Pinto,

JPMorgan’s president and the head of the corporate and investment bank, told staff in a memo last week.

—Orla McCaffrey and David Benoit contributed to this article.

Write to Charley Grant at charles.grant@wsj.com

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Business

Goldman Sachs Is Being Investigated Over E.S.G. Funds

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The Securities and Exchange Commission is investigating Goldman Sachs over its E.S.G. investment funds — funds that invest in companies that say they are committed to environmental, social and governance principles, according to two people familiar with the matter.

The agency is examining E.S.G. mutual funds overseen by the bank’s asset management unit, said the two people, who spoke on the condition of anonymity because they were not authorized to comment publicly on the matter. The Wall Street Journal reported earlier on the investigation.

The S.E.C. declined to comment.

Regulators have intensified their scrutiny of sustainable investment vehicles, which have become increasingly popular, but have also been criticized for their lack of accountability, with lawmakers and investors calling for them to be reined in.

E.S.G. reporting has emerged as a top priority for the S.E.C. under the agency’s chair, Gary Gensler. Earlier this year, the commission proposed changes that would require more disclosure from companies to investors about the risk that climate change and new government policies on it might pose to their operations. And last year, the regulator set up a special E.S.G. task force to focus on whether Wall Street firms and companies were misleading investors about their investment and business criteria in the environmental, social and governance area.

The investigation into Goldman’s mutual funds appears to be related to the new enforcement initiative. Last month, the investment advisory arm of Bank of New York Mellon paid about $1 million to settle an investigation by the S.E.C. into allegations it had omitted or misled investors about its E.S.G. criteria for assessing investments. The S.E.C. is also looking into Deutsche Bank.

Overseas, the authorities are also stepping up their investigation into how firms market E.S.G. criteria. Asoka Woehrmann, the head of Deutsche Bank’s asset management business, resigned this month after the company’s Frankfurt office was raided over allegations that it overstated claims on E.S.G. In May, HSBC suspended Stuart Kirk, who led responsible investing at its asset management unit after he said policymakers had exaggerated risks from climate change.

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