'2023 good time to reduce leverage': Nikhil Kamath after Goldman Sachs posts its worst earnings
1 min read . Updated: 18 Jan 2023, 12:20 PM IST
Premium- Goldman's profits tumbled 66% to $1.33 billion in the fourth quarter, well below what Wall Street had expected
Zerodha co-founder Nikhil Kamath has shared a piece of advice for companies after Wall Street's iconic firm-Goldman Sachs-posted its worst earning miss in a decade. Goldman's profits tumbled 66% to $1.33 billion in the fourth quarter, well below what Wall Street had expected.
The big investment bank pointed to a "significant decline" in completed mergers and acquisitions.
Zerodha's Kamath took to Twitter and wrote, "Deal-making is as good a forward indicator as any. 2023 might be a tough year everywhere," he added that 2023 could be a good time "to reduce leverage and diversify".
He also wrote, "Sometimes(very often) the best thing to do is to maybe do nothing".
Goldman Sachs' net income was $1.2 billion, down 69% following a 16% fall in revenues to $10.6 billion. The fourth quarter marked Goldman's fifth straight reported period of lower profits, compared with the year-ago quarter.
Chief Executive David Solomon acknowledged that the results were "disappointing," but emphasised that the company had achieved double-digit returns for all of 2022.
The US investment-banking giant has also poured billions of dollars into its retail effort, which includes the Apple Card and specialty-lending platform GreenSky. This has posted $3.8 billion in pretax losses over the past three years.
Executives highlighted a plan to scale back Goldman's ambitious consumer banking operation. They noted that results would be helped in 2023 by lower expenses after cutting 3,200 jobs earlier this month.
Investment banking fees were down 48% during the fourth quarter, a hit that was offset by a 44 percent jump in revenues tied to trading in fixed income, commodities, and currencies.
Chief Executive alluded to a cloudy outlook in 2023.
Solomon said the dramatic drop in merger-related revenues reflected an exceptional level of activity in late 2020 and 2021 due to heavy fiscal stimulus that was "not normal."
That climate "pulled a lot of activity forward," he said. "And then because of market disruption, we've tightened monetary conditions meaningfully in 2022."
Goldman’s shares slumped 6.4% in New York, the biggest drop in a year on 18 January.
