The US bank’s intermediation net revenues declined across FICC and equity partly due to derivatives in Q2; sales of retail structured notes fell 26% in its domestic market.

Goldman Sachs has reported net revenues of US$10.9 billion for the second quarter of 2023, eight percent lower year-on-year (YoY), and 11% lower from the previous quarter, according to the US bank’s latest earnings report.

The decrease ‘reflected lower net revenues in global banking & markets and slightly lower net revenues in asset & wealth management, partially offset by higher net revenues in platform solutions,’ stated the US bank headed by chairman and CEO David Solomon (pictured).

Operating expenses rose 12% to US$8.5 billion in Q2 23 YoY primarily due to an impairment of goodwill of US$504m related to consumer platforms and impairments of US$485m related to consolidated real estate investments. The expenses were a two percent increase quarter-on-quarter (QoQ).

As a result, net earnings fell 62% to US$1.2 billion in Q2 23 YoY, translating to a 57% decline from the previous quarter.

Structured notes

The outstanding balance of unsecured long-term debt raised in Q2 23, which includes structured notes, reached US$230.8 billion as at 30 June with an average maturity of seven years. Approximately 61.3% of the debt will mature by 2028, according to GS’ 10-Q filing.

In Q2 23, a total issuance of 8,639 retail structured notes in the US was recorded at US$27.4 billion – a stable level from a quarter ago.

Goldman slid to the third place in the issuer league table as a result of a decline in sales of 25.9% to US$3.45 billion in the three months YoY, after J.P. Morgan (US$4.7 billion) and Citi (US$3.49 billion). The three US banks accounted for 17.2%, 12.8% and 12.6% of the entire issuance amount, respectively, SRP data shows.

Offered to GS private banking clients, the Leveraged Capped Index-Linked Notes - S&P 500 (89114YV32) collected US$94.1m traded notional and was the third best-selling product in the US during the quarter. TD Securities was the note issuer and Simon Markets acted as the third-party distributor. It’s closely tailing behind the Buffer Autocallable GEARS - S&P 500 (36265J490) and Fixed Rate Step-Up Callable Notes (61760QNZ3), which were sold at US$108.2m and US$100m, respectively. 

Outside the US market, the US bank issued 24,815 listed structured products in Germany, 153 listed structured products in Hong Kong SAR, 1,282 structured notes in Switzerland and 157 structured notes in Taiwan in Q2 23. Other markets where the US bank was an issuer include France (19 products), Sweden (8), the UK (seven), Poland (six), Ireland (four), Italy (two), Finland (one), Belgium (one) and South Africa (one), according to SRP data.

Business segments

Global banking and markets posted net revenues of US$7.2 billion in Q2 23, which was 14% lower YoY, and 15% lower QoQ at GS.

By unit, investment banking fees declined 20% to US$1.4 billion YoY mainly due to a fall in advisory net revenues at US$645m.

Fixed income, currency and commodities (FICC) took a hit with net revenues dropping by 26% to US$2.7 billion, reflecting significantly decreased activities of intermediation.

Equities saw its net revenues unchanged at US$3 billion compared with the prior-year quarter as ‘significantly higher net revenues in equities financing, primarily in prime financing, [were] largely offset by lower net revenues in equities intermediation, primarily in derivatives’.

The asset & wealth management division saw net revenues down by four percent to US$3.1 billion in Q2 23 YoY, partly attributed to a net loss of US$403m in equity investments.

Meanwhile, platform solutions delivered net revenues of US$659m in Q2 23, a 92% increase YoY, US$577m of which came from consumer platforms.

Derivatives

As of 30 June, GS recorded derivative assets and liabilities of US$50.4 billion and US$50.9 billion, respectively, which were down 15.2% and 6.9% from six months ago, respectively.

The gross fair value for the derivative assets was US$447.4 billion, 57.8% of which came from interest rate, followed by currency, equity, commodity and credit.

Click the links to read the full Goldman Sachs Q2 earnings results, presentation and 10-Q filing.