Goldman Sachs said to disappoint on earnings day, with low single-digit ROE (NYSE:GS)

Michael M. Santiago

Goldman Sachs (NYSE:GS) will disappoint investors on earnings day next week, with return on equity — the key profitability ratio used to measure how much of a company’s revenue is returned as shareholder equity — expected to drop to the low single digits, according to media reports Thursday. .

By comparison, the Wall Street bank disclosed an annualized ROE of 11.6% in Q1, when fees from investment banking and fixed income trading revenue fell sharply from a year earlier.

Burdening Goldman’s (GS) Q2 results – due for release on July 19 – could include its withdrawal from consumer banking, as well as its exposure to the troubled commercial real estate market.

As such, impairments to fintech lender GreenSky, acquired less than two years ago, and to its CRE holdings, are expected to exceed $2 billion, Semafor reportedciting people familiar with the matter.

Goldman (GS) itself downplayed expectations for forthcoming earnings, as President John Waldron pointed to a 25% drop in trading revenue, he said last month in an industry conference. Analysts, in turn, rushed to lower the company’s Q2 earnings forecast.

Even so, Odeon Capital analyst Dick Bove looks beyond the results to come, upgrading GS to Buy from Hold, as his core business has bounced back amid strong equity markets.

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