Wall Street, Goldman Sachs soars with profit over 2 billion, Morgan Stanley falls
Two well-known Wall Street brands have concluded the overview of the most recent quarterly financial statements of the large American banks, thus closing a 2023 full of challenges and looking with optimism to the new year that has just begun. Goldman Sachs exceeded performance expectations in the October to December period, recording a 51% increase in profits, which reached $2.01 billion, marking a recovery compared to the same period in 20202, characterized by significant costs. According to what was reported by Il Sole 24 Ore, the revenues (“revenue”) they rose by 7%, reaching 11.32 billion. On the other hand, Morgan Stanley recorded a decline in profits of around 30%, reaching 1.52 billion in the fourth quarter, marked by extraordinary items exceeding 500 million.
The prolonged period of weakness in crucial sectors such as investment banking affected the profits of both groups for the entire previous year. Goldman's quarterly results were driven primarily by growth in its asset and wealth management sector, a welcome development after a phase characterized by expensive and failed bets in consumer services. Revenue from asset and wealth management recorded an increase of 23%, reaching 4.39 billion. Goldman announced that it has reached its fundraising goal for alternative assets early, with 251 billion since the beginning of 2019, exceeding a target of 225 billion and accumulating a total of 450 billion in such assets. In trading, equities rose 26% to $2.6 billion, offsetting a 24% decline in fixed income. Investment banking fell 12% to 1.65 billion.
CEO David Solomon expressed optimism about improvements in mergers and capital markets, especially in the second half of 2024. On the other hand, competitor Morgan Stanley was burdened with legal costs of 249 million related to the resolution of SEC investigations, as well as contributions of 286 million to the FDIC anti-crisis fund, requested to all major credit institutions. The new CEO, Ted Pilo, reiterated the bank's strategy, which has long focused on the more stable asset management segment. In a more cautious tone than Goldman, he warned that although the economy appears to be heading towards a soft landing, risks related to geopolitical tensions and the health of the US economy remain. Morgan and Goldman have completed the presentation of the financial statements of American financial institutions, which showed varied performances: JP Morgan reported record annual profits, although it slowed in the fourth quarter, as CEO Jamie Dimon raised unanswered questions on the economic and international stage.
Bank of America and Wells Fargo recorded less brilliant results, and Citigroup even reported losses, finding itself at the center of major reorganizations. The quarterly earnings of American companies, according to FactSet, seem destined for a slight overall decline of 0.1%, but, based on traditional positive surprises, they could leave room for an increase of around 4% among the S&P 500 groups, driven by sectors such as communication and essential services, but penalized above all by financial and energy. This earnings season, if met, could perhaps dissipate fears of a profit recession, but the unknowns raised by Gorman and Dimon remain.
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