The new Goldman Sachs still looks like the old one.
Six months after David Solomon was named chief executive, Goldman Sachs said Monday its profits in the first quarter of the year were kneecapped by tepid trading — the same problem that had bedeviled former CEO Lloyd Blankfein.
The Wall Street bank slashed its bonus pool by a fifth as profits dropped 21 percent from the same period a year ago, to $2.25 billion — mainly because of another lousy quarter in trading across bonds, currencies, commodities and stocks, the bank’s largest business.
Total compensation and benefits for employees fell 20 percent, to $3.26 billion, from $4.06 billion a year ago — even as the total headcount rose 6 percent to 35,900. That means that the average total package across all employees fell to $90,779.94 from $119,323.53 — a nearly $30,000 difference over a year.
In fact, the biggest gain for the bank came in one of its mid-sized businesses, financial advisory for mergers and acquisitions, which saw a 51 percent increase in revenue, to $887 million.
“While we aspire to bring stronger results, the overall franchise performed well,” Solomon, who took the helm in October, said on an earnings call with analysts.
The disappointing earnings sent the bank’s stock falling more than 3 percent, to $201.34 in morning trading.
One bright spot for the bank was a drop in money set aside for the giant Malaysian bribery scandal around the fund 1MDB, as well as other legal and regulatory costs. The bank spent $37 million in provisions for legal and regulatory proceedings, down from $516 million the previous quarter.
When asked by an analyst to explain where the bank was with 1MDB litigation — which some analysts expect could top $5 billion — Solomon declined to give any details about talks with the Justice Department or any of the other agencies or governments investigating the bank.
While the bank reported weak results, Solomon and other execs tried to calm analysts with talk about the company’s plan to branch out into other businesses.
“We are on an evolutionary path,” Solomon said.
Among those businesses are a planned team of 100 bankers to advise companies smaller than $2 billion, and a push to do cash management for corporations, which could bring in as much as $5 trillion in deposits, the bank’s CFO, Stephen Scherr, said during the call.
Goldman has made significant efforts in recent years to diversify into new forms of banking and financial services. The bank has a growing consumer banking franchise known as Marcus, which offers high-interest online savings accounts and CDs as well as debt consolidation personal loans. Goldman also recently jumped into the credit card business, becoming the issuing bank for Apple’s new credit card.
The bank still does not break out Marcus, or its consumer bank franchise, as a line item on its results. However the bank did see a significant jump in interest income in the quarter, reporting net interest income of $1.22 billion, up 33 percent from a year earlier.