Goldman Sachs (GS) CEO David Solomon said in a Friday interview with Yahoo Finance that he is encouraged by a string of initial public offerings expected in the coming weeks, predicting a “pickup in the capital markets activity” over the course of the fall.
If the IPOs go well, he said, it could create a “virtuous cycle” that attracts other companies still waiting on the sidelines.
Goldman also stands to benefit. It is among the banks leading the underwriting for IPOs from SoftBank Group’s Arm Holdings and grocery delivery service Instacart, which would both be among the year’s biggest.
“Obviously an environment with more capital markets activity is a good environment for Goldman Sachs,” he said.
Solomon is under pressure to improve Goldman’s results after reporting the firm’s lowest quarterly profits in three years. He is wrestling with everything from job cuts and a two-year-long investment banking slump to reports of partner unrest and questions about his leadership style.
He declined during the interview to address some recent media stories about his leadership, saying “I’ve talked plenty about the noise and the press.” His focus each day, he said, is on the company and its clients and delivering for shareholders — “that’s the discussion inside Goldman Sachs.”
Clients, he added, “have enormous confidence in Goldman Sachs. The feedback from our clients around Goldman Sachs and the work we do for them continues to be very, very strong.”
Goldman’s stock is down 5.5% so far this year. It has outperformed Bank of America (BAC) and Citigroup (C) while underperforming Morgan Stanley (MS) and JPMorgan Chase (JPM). The KBW Nasdaq US bank index (^BKX) is down 21% for the same period.
Since Solomon became CEO in October 2018, Goldman’s stock is up 45%. That is better than many Wall Street banks, except rivals Morgan Stanley and Jefferies (JEF). The KBW index has fallen 23% over the same time.
The new fall lineup of IPOs, which also includes marketing automation software firm Klaviyo and German shoe maker Birkenstock, comes just in time for banks like Goldman that hope to end an extended dealmaking slump that followed a boom in 2021.
Clients turned cautious about everything from the direction of interest rates to relations with China to the larger US economy, dampening the optimism needed to go public, buy other companies, or take on more debt.
As dealmaking dried up, Goldman and other firms across Wall Street slashed bonuses and staff, announcing cuts of roughly 20,000 jobs since the end of 2022.
“We’ve been through a really tough year for capital markets activity,” Solomon said Friday.
“We went from a very robust environment in 2021 to obviously a much different environment after the war in Ukraine started and obviously … very, very high rampant inflation” that the Federal Reserve tried to tamp down with the most aggressive series of interest rate hikes in decades.
But the US economy, he said, “has been a lot more resilient over the last 12 months than we would have expected. I think the chance for a softer landing right now is much higher than we would have anticipated a year ago.”
Goldman’s chief economist Jan Hatzius, who has been one of the most outspoken voices on Wall Street about a reduced risk of a recession, lowered expectations for a recession further earlier this week.
While Goldman waits out the tepid period of dealmaking, Solomon is also attempting a tricky retreat from a costly push into consumer banking and backing away from offering financial advice to mass market customers so that the firm can focus on its core ultrarich clients.
He said Friday that Goldman has no plans to buy a bank and is focused on its principal businesses: investment banking and markets and wealth management.
“That’s where the lion’s share of the firm’s focus is at this point in time.”
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