NEW YORK, Jan 17 (Reuters) – The financial fortunes of Wall Street investment banking titans have split, with Morgan Stanley (MS.N) enjoying higher wealth management revenue while Goldman Sachs (GS .N) suffered from higher costs and increased rainfall. day funds.
Goldman posted fourth-quarter earnings of $3.32 a share, missing Wall Street’s estimate of $5.48, according to Refinitiv IBES data, sending its shares tumbling 6.5%.
Shares of Morgan Stanley rose 6% after earning $1.31 per diluted share on an adjusted basis, well above analyst estimates of $1.19 per share, according to Refinitiv IBES data.
Banking news caps a period of mixed fourth quarter results for major US banks.
“This round goes to Morgan Stanley, as they seem to be one of the most notable bank earnings,” said Edward Moya, senior market analyst Americas at OANDA.
Morgan Stanley’s wealth management business saw revenue climb 6% in the quarter as interest income rose amid interest rate hikes by the U.S. Federal Reserve for most of Last year.
Goldman’s results also included a net loss of $660 million in its platform solutions unit, which houses the transaction banking, credit card and fintech businesses, as provisions for credit losses rose. as the business grew.
Goldman is curbing its consumer banking ambitions as CEO David Solomon refocuses the bank’s resources on bolstering its core businesses such as investment banking and trading.
Even so, Goldman Sachs’ annual results still held up in the face of tough market conditions, said David Fanger, senior vice president of Moody’s Investors Service.
Both banks reported falling investment banking revenue as Wall Street dealmakers handling mergers, acquisitions and IPOs faced a sharp drop in business in 2022.
Goldman Sachs chief executive David Solomon has confirmed the bank is cutting its workforce by 6%, or about 3,200 jobs, and making changes to its consumer business to navigate an uncertain outlook for 2023.
“We tried to do too much, too fast,” he said of the bank’s consumer business. “We didn’t execute some of them perfectly, so we looked at them carefully and you make adjustments.”
UBS analysts wrote in a note that fundamental trends for Morgan Stanley in the fourth quarter were encouraging and broke the low bar.
Revenue from Morgan Stanley’s investment banking business fell 49% to $1.25 billion in the fourth quarter, with revenue declines in the company’s advisory, equity and fixed income segments. bank.
A slowdown in investment banking weighed on the company’s net income, sending it down 12% to $12.7 billion.
“I’m very confident that when the Fed pauses, deal activity and underwriting activity will pick up,” Chief Executive James Gorman told analysts on a call.
Still, chief financial officer Sharon Yeshaya told Reuters earlier on Tuesday that the bank was comfortable with its workforce after recent layoffs. Morgan Stanley cut 2% of its workforce in December, or around 1,600 jobs, a source told Reuters.
Trading came as a surprise for Morgan Stanley, with the unit’s revenue jumping 26% in the fourth quarter as clients seek to hedge against market risk by shifting portfolios to more defensive assets.
Looking ahead, Gorman said the bank’s wealth management and investment businesses are expected to account for an increasingly larger share of the company’s pretax profit in coming years.
The wealth management unit also helped the bank keep funding costs lower amid a rate hike cycle, the CEO added.
Mark-to-market losses on business loans were $876 million as interest rates rose. This includes debt to Twitter, the CFO said. Morgan Stanley is part of a group of banks that provided a $13 billion loan to finance Elon Musk’s acquisition of the social media company.
Updating Morgan Stanley’s outlook, the chief financial officer said the bank’s net interest income, or the money banks earn from interest payments, hasn’t peaked, despite being likely to reduce its growth rate this year.
Reporting by Manya Saini and Mehnaz Yasmin in Bengaluru and Carolina Mandl and Saeed Azhar in New York; Additional reporting by Amruta Khandekar; Editing by Shounak Dasgupta, Mark Porter and Anna Driver
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