Lloyd Blankfein is giving Goldman Sachs a new reputation: mediocrity.
Wall Street on Tuesday shrugged at Goldman Sachs’ second-quarter results, sending the stock down 1.2 percent after the bank announced that three of its four business sectors saw a revenue decline in the quarter.
Reflecting the downturn in revenue, the firm’s accrual for compensation fell 13 percent in the quarter.
In addition, Goldman, seeking ways to better its top line, said it would enter the very pedestrian business of making uncollateralized consumer loans.
Overall, profits rose by 74 percent, to $1.8 billion, in the quarter from $1 billion in the second quarter from the same period last year — although last year’s profit was dragged down by a $1.45 billion charge for legal expenses.
Total revenue, dragged down by investment banking, investment management, commissions and fees fell 13 percent, to $7.9 billion.
Blankfein, reacting to the expected slowdown in revenue, cut payroll by 5 percent in the quarter, the company said in a regulatory filing.
By business sector, investment banking revenue fell 11 percent, investing and lending revenue was off 38 percent and investment management revenue slipped 18 percent, the company said.
Institutional client services, on the strength of an 8 percent rise in trading revenues, rose 2 percent.
The underwhelming second quarter continues a rough six-month stretch for Goldman. During the first three months, profits plunged 60 percent, and the bank posted a 40 percent drop in revenue, marking the steepest decline since Blankfein took the top post in 2006.
Prominent securities analyst Dick Bove had criticized the chief executive for creating a “lost decade” by doubling down on trading and investment banking — businesses squeezed by low interest rates and regulatory pressures.
That pressure seems to have gotten to the bank’s top execs.
“While, like the rest of the world, we would welcome more robust economic growth, ultimately we have to manage the firm for both the current environment and potential future opportunities,” Chief Financial Officer Harvey Schwartz said during a call with analysts.
Goldman’s plan to offer loans to consumers through an online platform will start in the fall, Schwartz said. Unsecured loans are funds without collateral, like credit cards, student loans and personal loans.
The move into consumer loans comes after Goldman opened its doors to the 99 percent through GS Bank — a move that helped ease regulatory pressure by diversifying the kinds of assets it holds.