Earnings per share for the fourth quarter of 2022 were $3.32.
(Photo: Reuters)
Frankfurt Goldman Sachs continues to come under pressure: in the fourth quarter of last year, the major US bank suffered a 66 percent drop in profits compared to the same quarter last year. Net income for the October-December period was $1.3 billion. Earnings fell 12 percent from the same quarter last year to just under $10.6 billion.
The fifth-largest bank in the USA thus generated earnings of 3.32 dollars per share and was thus well below the analysts’ expectations. According to data from the analysis company Refinitiv, they had expected an average of $5.48. At competitor Morgan Stanley, on the other hand, things looked a little better: The result in asset management was able to cushion weaknesses in other areas.
Goldman Sachs was down more than 3.5 percent in early New York trading on Tuesday, while Morgan Stanley was up nearly 5 percent.
In particular, the business of IPOs, mergers and acquisitions, which is so important for Goldman Sachs, has practically come to a standstill throughout the industry after the Ukraine war and because of rising interest rates. As a result, investment banking revenues fell 48 percent in the fourth quarter compared to the prior-year quarter.
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Business with private customers is also a burden on the major US bank. With the initiative, CEO David Solomon wanted to diversify the bank’s business model and open the bank to a broader range of customers. But the move turned out to be more expensive than planned. The bank announced last Friday that a large part of the private customer business had made high losses. The minus since 2020 is said to be a good three billion dollars. Among other things, it is about the online bank Marcus and the credit card business.
In addition, the bank also increased risk provisions in the event of increasing loan defaults. The bank put back $972 million in the fourth quarter, after $344 million in the same quarter last year.
Goldman Sachs’ results for the fourth quarter are even worse than expected, comments Octavio Marenzi from the capital market consultancy Opimas. But the real problem lies in the fact that operating costs have risen by eleven percent while revenues have collapsed. “This strongly suggests more cost cutting and layoffs are on the way.”
It has been reported since January that Goldman Sachs wants to part with 3,200 bankers. It would be the largest wave of layoffs since the 2008 financial crisis.
Morgan Stanley benefited from rising interest rates
Unlike its competitor, Morgan Stanley exceeded analysts’ expectations. The bank also had to accept a profit slump – and achieved a net profit in the fourth quarter of 2.2 billion dollars. This means a decline of almost 40 percent compared to the same quarter of the previous year. However, the analysts had previously only expected earnings of $1.19 per share, with the US bank exceeding these expectations at $1.26.
Bank chief James Gorman said: “We delivered solid results in the fourth quarter in a difficult market environment.”
Revenues fell 12 percent to $12.7 billion in the October-December period compared to the prior-year quarter. In investment banking, they even slumped by 49 percent to $1.25 billion.
But a record result in wealth management helped Morgan Stanley mitigate weaknesses elsewhere. The financial institution recorded sales of $6.62 billion in the business area, an increase of 5.9 percent compared to the same quarter last year. The bank benefited from the significantly higher key interest rates of the US Federal Reserve, which caused net interest income to rise.
In the trading business, Morgan Stanley also benefited from the turbulent stock markets. Due to fears of inflation and recession, many investors on the financial markets had their portfolios rebalanced, which strengthened trading in securities.
More: The weaknesses of Wall Street banks are a bad omen