Goldman Sachs Group Inc. was stung by slumping investments in some big names in the third quarter, hurting its most profitable business line.
The firm took a $267 million hit in the period on public equity investments such as ride-hailing company Uber Technologies Inc., Avantor Inc. and Tradeweb Markets Inc. The bank probably took a writedown on its stake in WeWork after plans for an initial public offering collapsed. The losses fueled the worst performance in more than three years for the bank’s equity wagers in public and private companies.
Goldman’s investment bankers also logged a much bigger decline in fees than analysts had predicted, down 15% from last year’s third quarter. They delivered their worst showing in David Solomon’s tenure as chief executive officer amid choppy markets and marquee deals that had to be pulled.
That performance was softened by an improved showing from traders amid signs of a revival in Goldman’s biggest unit. Trading revenue rose 6% from a year earlier to $3.29 billion, the New York-based bank said Tuesday in a statement. That beat the $3.17 billion average estimate of analysts in a Bloomberg survey. Earlier in the day, JPMorgan Chase & Co. reported results that beat Wall Street estimates, driven by stronger than expected revenue from its fixed-income traders.
Goldman shares slumped 3.1% to $199.36 at 9:36 a.m. in New York, the worst performer among the four biggest U.S. banks that posted results Tuesday. The shares were still up 19% for the year.
Gains from investments with its own money are sometimes Goldman Sachs’s biggest profit driver, and executives have argued they showcase a core skill that should be valued by shareholders. But the slump in prized holdings will add to a perception that the investments are subject to unpredictable swings even as the company works to provide more disclosure.
The losses from Uber and other investments in the third quarter come after those positions had delivered big gains in previous periods.
Wall Street banks grappled with increased volatility in the third quarter, while executives grew cautious about its benefits to their trading desks. Goldman had snatched market share from weaker rivals in a boost for its operations earlier in the year.
Goldman Sachs is in the middle of a significant strategic shift as it retools businesses. The push includes a nascent consumer-banking effort, cash-management tools and new initiatives to win more business from existing clients. The firm also rolled out credit cards as part of a partnership with Apple Inc.
Investors and analysts still await a more-detailed strategic update from Solomon, who took the top job more than a year ago. He has vowed to tighten up the partnership ranks and installed new leaders across divisions, even as he works for a resolution to the 1MDB banking scandal.