new York Depressed mood on Wall Street: The war in Ukraine and the associated volatility on the markets are also reflected in the banks’ quarterly figures. Goldman Sachs reported a 42 percent drop in profits to $3.9 billion on Thursday.
The equity underwriting business “has practically ground to a halt,” said CEO David Solomon. Many mergers and acquisitions are also on hold for the time being. Investment banking revenue fell 36 percent to $2.4 billion.
However, trading in securities went much better than expected. Retail sales increased by four percent overall. Above all, trading in fixed-income securities, raw materials and foreign exchange was strong with a plus of 21 percent. Stock trading, on the other hand, fell 15 percent to $3.2 billion.
But overall, that wasn’t enough to offset the slump in investment banking. “It was a turbulent quarter dominated by the horrific invasion of Ukraine,” Solomon said. The bank’s net income fell by almost 27 percent to $12.9 billion in the first quarter of the year.
Top jobs of the day
Find the best jobs now and
be notified by email.
The consumer business and wealth management business fared significantly better. Revenue there increased 21 percent to $2.1 billion. The division is a key building block in Solomon’s strategy to make Goldman less dependent on volatile trading. The online bank Marcus and the credit card business are also part of it.
But the bank is also bracing for rising loan defaults, increasing loan loss provisions for the first time since the pandemic began, by $561 million. In this way, the bank wants to be prepared for the “impact of macroeconomic and geopolitical risks”.
Morgan Stanley is helping Musk with Twitter takeover
Morgan Stanley fared a little better, with net income falling just 11 percent to $3.5 billion. Morgan Stanley earned $2.02 per share, down from $2.19 a year earlier. Bank boss James Gorman said the institution has done well despite a volatile market and economic uncertainties. The results beat analysts’ forecasts and the stock responded by surging 2.4 percent in early New York trade.
Earnings fell 6 percent to $14.8 billion. In investment banking, they slumped 38 percent to $1.6 billion. The bank withdrew from Russia several years ago and returned its banking license. Therefore, the direct effects of the Ukraine war are limited, explained CFO Sharon Yeshaya.
One deal will be a particular focus in the coming weeks. Tesla boss Elon Musk announced on Thursday that he wanted to take over the short message service Twitter and had hired Morgan Stanley as a consultant.
Wells Fargo makes a fifth less profit
The major US bank Wells Fargo also recorded a significant drop in profits at the start of the year. Very high inflation and rising interest rates, as well as concerns about the possible economic impact of the The Ukrainian war put pressure on business.
Profits shrank in the first quarter within a year by more than a fifth to 3.7 billion dollars, as announced by the San Francisco-based fourth-largest bank in the USA. The institute made a profit of 88 cents per share after $1.02 per share a year earlier. However, analysts had only expected an average of 80 cents per share.
US banks are coming under pressure because of the consequences of the Ukraine war.
(Photo: Reuters)
Internal indicators continued to point to the financial strength of customers, explained bank boss Charlie Scharf. However, the US Federal Reserve has made it clear that it will take the necessary steps to lower inflation. “And this will certainly reduce economic growth,” warned Scharf.
Inflation in the US climbed to 8.5 percent in March. In addition, there are further risks from the Ukraine war, said Scharf.
The bank’s total revenues fell 5 percent year-on-year to $17.6 billion in the January-March period. Analysts had expected $17.8 billion.
Profit also shrinks at JP Morgan
JP Morgan had already started with the quarterly figures on Wednesday. America’s largest bank reported a 42 percent slump in profit for the first quarter on a yearly basis and increased provisioning for the first time since the pandemic began to prepare for defaulting loans. The money house felt the high inflation, rising interest rates and the consequences of the Ukraine war in various ways.
>>Read also: Exit of the Capital Group triggers price slides at Deutsche Bank and Commerzbank
Investment banking, like Goldman Sachs, came to a virtual standstill with the onset of the war. The volume of announced and completed mergers and acquisitions fell to its lowest level since the beginning of the pandemic, according to data from the analysis house Refinitiv. Investment banking revenue fell 28 percent to $2.1 billion in the first quarter.
The granting of new mortgage loans fell by 37 percent in view of the significantly higher interest rates. Retail sales fell by three percent and, at $8.75 billion, were a good $1 billion higher than initially expected. JP Morgan also announced a $30 billion buyback program.
Citigroup exceeds expectations and wants to reduce business in Russia
And the US financial group Citigroup also started the financial year with significantly less profit. In the first quarter, the surplus fell by around 46 percent year-on-year to $4.3 billion (four billion euros), as the money house announced in New York on Thursday.
Total revenue fell just 2 percent to $19.2 billion. Overall, the quarterly figures exceeded expectations. The securities trading business in particular was also relatively stable at Citigroup.
However, Citi had to absorb almost $2 billion in balance sheet charges from Russia’s war of aggression against Ukraine. Unlike most other big US banks, the money house still has a strong business presence in Russia, which has become a problem due to the war and sanctions.
The institution is trying to reduce exposure, but is preparing for high loan default provisions. Bank boss Jane Frazer warned of increasing geopolitical and economic risks.
With agency material
More: JP Morgan profit slumps in first quarter