Goldman Sachs Exited 2023 With A Q4 Win But Like Morgan Stanley, Its Annual Figures Lacked Luster

During the second week of the new year, JPMorgan Chase & Co JPM, Wells Fargo & Company WFC, Bank of America Corporation BAC and Citigroup Inc C opened the earnings season by with their reports, with one-time charges tainting how well they performed over the fourth quarter of 2023. Moreover, JPMorgan Chase reported its best-ever annual profit. A week after, four biggest U.S. banks were joined by The Goldman Sachs Group Inc GS who blew past estimates and Morgan Stanley MS who reported mixed fourth quarter results along with warning of geopolitical and economic risks ahead.

Morgan Stanley Did Top Estimates On The Revenue Front But Its Earnings Were Depressed By One-Time Fees

Morgan Stanley reported its quarterly profit tanked 32%, but due to strength of its investment banking division, Morgan Stanley managed to surpass LSEG’s revenue estimates of $12.75 billion by posting revenue of $12.90 billion. Investment management brought in $1.46 billion while wealth management contributed $6.65 billion to the revenue table. But, dragged by two one-time regulatory charges, net income amounted to $1.52 billion or 85 cents per share. The new CEO, Ted Pick, warned of intensifying geopolitical conflicts and the state of the U.S. economy as being the two biggest threats to the bank’s 2024 performance. As for the full year, Morgan Stanley reported its 2023 net income dropped 18% to $9.1 billion.

Goldman Sachs Blew Past Fourth Quarter Estimates, Putting An End To Its Quarterly Streak Of Declines

Before the latest report, Goldman Sachs reported eight consecutive quarters of declines due to a costly dissolvement of its consumer arm. But this quarter, Goldman Sachs sang a different tune. Fueled by impressive performance from asset and wealth management units, Goldman Sachs reported a strong fourth quarter. With revenue of $11.3 billion, Goldman Sachs easily surpassed FactSet’s estimate of $10.8 billion. With a profit that surpassed $2 billion, Goldman Sachs reported a 51% YoY rise. Earnings per share of $5.48 also smashed FactSet’s estimate of $3.62.

But, most of its gains did not come from its strongest divisions, investment banking and trading. Moreover, investment banking recorded a 12% YoY drop to a bit below $1.7 billion, while trading recorded a 2.5% revenue drop to $4.6 billion. Like its banking peers, Goldman Sachs was also assessed a hefty fee by the Federal Deposit Insurance Corporation to help clean up a mess from the collapse of Silicon Valley Bank and Signature Bank, but $529 million is significantly less than $2.9 billion, $2.1 billion and $1.7 billion that JPMorgan Chase, Bank of America and Citigroup paid, respectively.

However, better-than-expected fourth quarter results didn’t save Goldman Sachs from reporting its 2023 net income fell as much as 24% to $8.5 billion. Its annual profit lacked luster greatly due to its withdrawal from retail banking.

While 2023 Was Challenging, 2024 Brings A Hint Of Optimism, Even Though Challenges Remain 

With a background of a slowdown in investment banking and bond trading, Goldman Sachs and Morgan Stanley reported their lowest profits in four years. Their profits, along with those of JPMorgan Chase & Co, Wells Fargo & Company, Bank of America Corporation and Citigroup Inc were hit by one-time charges. After observing a rise in credit loss in provisions, Wells Fargo also warned of a drop in net interest income. But, Wells Fargo is confident that stronger returns are coming. With its income dragged by $4 billion in one-time charges, Citi Group had its worst quarter in 14 years. But Citi Group CEO Jane Fraser remains confident that 2024 will be a turning point for Citi Group as it made significant progress with its restructuring efforts in 2023. Even Morgan Stanley entered 2024 with confidence while acknowledging the weight of macroeconomic risks.

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