Goldman Sachs (GS) had a rough fourth quarter to say the least. Profit dropped 66% from a year earlier, falling short of analysts’ expectations.
CNBC commentator Jim Cramer didn't hold back in describing the giant bank’s performance.
“This is disappointing straight up,” he said on CNBC. “It’s not up to snuff for Goldman Sachs. I didn’t see anything in [the earnings report] to like.”
Cramer noted Goldman’s trouble with its foray into consumer banking. The firm said Friday that a sizable portion of its consumer lending business, including credit cards, has suffered a loss of $3 billion since 2020.
“It has spent a lot of money without clear returns,” Cramer said.
“They will say the card business isn’t a problem,” he continued. But Cramer cited an anonymous top banker who said you can’t start a credit card from scratch as Goldman did.
“Goldman Sachs is a high net-worth company,” Cramer said, suggesting Goldman may succeed in “lower net-worth” banking if it could do it all with an automated system or artificial intelligence.
Investment Banking, Wealth Management Woes
Goldman needed to do better in investment banking – mergers and acquisitions and corporate finance – to make up for the consumer banking problems, Cramer said.
The firm’s investment banking revenue dropped 49% to $1.25 billion in the fourth quarter, down from $2.43 billion a year earlier.
Cramer also said Goldman’s bulging expenses are problem. Operating expenses climbed 11% in the fourth quarter to $8.09 billion. And compensation costs totaled $3.8 billion, up 16%.
“That’s not acceptable,” Cramer said. “It would be one thing if they had a gigantic wealth management business with the jump we saw at Morgan Stanley,” he said. But, “wealth management was disappointing.”
Goldman’s asset- and wealth-management business registered revenue of $3.6 billion in the latest quarter, down 27% from a year ago.
Meanwhile, Morgan Stanley posted record wealth management revenue of $6.62 billion, up 5.9%.
Bottom line for Goldman’s earnings: “They should have made more,” Cramer said.
The author of this story owns shares of Goldman Sachs.