Goldman Sachs reported lower first-quarter earnings Monday on weakness in its traditional trading business as it emphasizes newer consumer-oriented ventures, including a credit card that will be launched with Apple.
The financial giant saw net income plunge to $2.1 billion, a 20.3pc drop from the same period of last year. At the same time revenues fell 12.7pc to $8.8 billion.
The price of Goldman shares tumbled on the results and were joined by Citigroup, which dipped after reporting a slight increase in first-quarter profits.
Goldman encountered sharp declines in key trading divisions, such as equities and bonds. Market conditions improved from the prior quarter, but volatility was low, crimping trading activity, the investment bank said.
A bright spot was financial advising for mergers and acquisitions where it scored a boost in revenues, while underwriting revenues fell.
There were no major announcements about the scandal involving Malaysian fund 1MDB, which has prompted a series of government probes.
“Nobody wants to get to a resolution on this faster than we do,” Chief Executive David Solomon told analysts. “And we are absolutely committed to doing everything that we can to move the process along as quickly as possible.”
Executives outlined a number of growth initiatives, including the expansion of its “Marcus” online consumer lending and banking venture that has been touted as a means to diversify the firm beyond Wall Street.
Marcus offers personal loans and has attracted deposits by paying much higher interest rates than rival banks. The bank hopes to lure in users who will evolve into long-term customers who can help drive profitability.
A key element will be the launch of a credit card with Apple, although there is no launch date yet.
“We look for markets that are big where we don’t need to capture commanding market share to be relevant,” said Chief Financial Officer Stephen Scherr.
“We’ve also looked at markets and at products where there are pain points felt by the consumer,” Scherr told analysts. “We have done that successfully in loans and now we are doing that in the card space.”
Other growth ventures included tapping into a broader wealth management customer base by targeting more executives at mid-sized companies.
Goldman currently provides wealth management services to 60 of the Fortune 100, but only 220 of the top 1,000. The larger pool opens a much larger group of the “mass affluent business,” executives said.
Meanwhile, Citigroup reported first quarter profit of $4.7 billion, a 1.9pc increase from the year-ago period, while revenues dropped 1.6pc to $18.6 billion.
Citigroup Chief Executive Michael Corbat cited growth in its credit card business and said new digital banking initiatives in the US were boosting deposits.
“While GDP growth does appear to be slowing somewhat, we still see good consumer and corporate engagement,” Corbat said on a conference call with analysts.
Shares of Goldman fell 3.0pc to $201.66 in late-morning trading, while Citigroup slipped 0.3pc to $67.19.