The bank will also reinstate its annual employee performance review at the end of the year, a process it had suspended during the pandemic period, he said.
Restoring the process that tends to identify underperformers has been the strongest signal that Wall Street banks may be eyeing potential job cuts as the trading outlook turns tough. Wall Street had eased its hiring after a hiring spree last year.
Goldman Sachs CEO David Solomon said the market environment has become more “complicated” due to a combination of macroeconomic and geopolitical conditions, citing the war in Ukraine.
“We see inflation deep in the economy,” he said. “And what is unusual in this particular period is that demand and supply are affected by exogenous events, namely the pandemic and the war.”
Despite the trading tumble, Goldman shares rose 3% as revenue from the global markets unit, which houses its trading desks, jumped 32% to $6.47 billion, with revenue fixed, commodities and trading revenue up 55% and equity revenue adding 11 percent.
Goldman’s chief financial officer also said the bank will look “very carefully” at takeovers. Other banks, such as JPMorgan, have suspended redemptions.
“We didn’t give a number for this quarter, but we said we’re looking at it very carefully. We’re operating with excess capital right now,” he said.
Goldman’s quarterly report capped profits for big banks and mirrored peers JPMorgan and Morgan Stanley, both of which reported that investment banking revenue had more than halved. However, Goldman’s business unit outperformed JPMorgan and Citigroup, which last week announced market revenue increases of 15% and 25% respectively.
“Goldman has once again shown that it can excel in challenging markets given a leading pace in each of its four business lines,” Wells Fargo banking analyst Mike Mayo wrote in a note.
According to data from Ernst & Young.
The value of announced deals fell 25.5% year on year to $1 trillion in the quarter with M&Activity in the United States in free fall of 40%, according to data from Dealogic.
“The news from the banks was certainly very bad for the most part,” said Rick Meckler, partner at Cherry Lane Investments, adding, however, “It was not unexpected when you consider that investment banking revenues are really falling and that some of them the banks have taken large credit reserves.
Goldman’s net revenue fell 23% to $11.86 billion in the second quarter and profit nearly halved to $2.8 billion, or $7.73 per share.
Mr. Solomon has worked to reduce the bank’s reliance on volatile transactions and investment banking by focusing on Marcus, its consumer banking unit.
Consumer and Wealth Management reported a 25% increase in net income to $2.18 billion, due to higher management fees and credit card balances.
However, if the US Federal Reserve raises borrowing costs further to a level that limits consumer spending, loan demand could suffer.
Goldman has set aside $667 million to cover credit losses, compared with net income of $92 million in the same period a year ago.
The US central bank tried to rein in a relentless price spike and pledged a “soft landing”.
In June, the Fed raised its benchmark federal funds rate by 75 basis points, the biggest hike since 1994, as inflation rose unexpectedly despite expectations that it had peaked.
Goldman’s net interest income jumped 6% to $1.73 billion.