GS Stock Drops 4% Amid Softer Trading Volumes and Rising Costs
Goldman Sachs' stock price dropped around 4% following CEO David Solomon's announcement that trading volumes were softer in the current quarter. This was attributed to a lag in fixed-income performance compared to equities, as well as rising non-compensation costs by approximately $500 million sequentially.
The bank expects revenue from investments to decrease in Q3 due to an unusually strong second quarter and slightly higher year-over-year loan-loss provisions caused by idiosyncratic factors. In contrast, market volatility may lead to increased trading and risk-management revenue, while tighter financing could negatively impact M&A and equity deals.
Goldman Sachs notes that its valuation is above the Goldman Sachs Value, which indicates a potentially high price-to-earnings ratio. The bank also cites potential for >10% long-term EPS growth through efficiency gains, operating leverage, and profit improvements in banking, markets, asset and wealth management segments.