(Bloomberg) -- Goldman Sachs Group Inc. is signaling a note of caution to investors after posting some of the biggest stock advances among its peers this year.
The bank’s trading unit is on track to drop 10% from the prior year, led by declines in the fixed-income business, Chief Executive Officer David Solomon said at a Barclays Plc conference Monday. The New York-based company will also take a $400 million pre-tax hit in its narrowing consumer business as it moves away from its credit card tie-up with General Motors Co. and its seller-financing operations.
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The stock fell as much as 4.5% and was down 3.8% at 10:29 a.m. in New York, making it one of the worst performing stocks in the KBW Bank Index. Goldman appeared to be lowering expectations ahead of third-quarter results next month, according to Wells Fargo & Co. banking analyst Mike Mayo.
“Interestingly, GS did not provide a guide for IB, leaving the possibility that GS gave the bad news without giving the good news,” Mayo wrote in his note.
Analysts had estimated a 6.6% decline in its trading unit this quarter but Solomon telegraphed a bigger drop, highlighting the strength in the same period last year that its traders will be unable to match, as well as a more challenging environment particularly in August.
Goldman’s stock has been charging higher, up 27% this year and posting bigger gains than most of its rivals. That’s been driven by a resurgence in its core investment-banking business and as it radically shrunk its newfangled retail unit that proved to be a challenging foray for the firm.
The 62-year-old said that dealmaking activity has been better as strategic tie-ups picked up meaningfully. But he also pointed to challenges for that business, including the slower activity level from buyout firms as well as the hawkish stance of the Federal Trade Commission that has made it more challenging to push through certain deals.
“The US economy is in reasonable shape,” Solomon said. “It doesn’t seem obvious to me that we are heading into a credit cycle.”
(Updates with details on stock move and analyst comment.)
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