Big Bank Stocks Mixed After Q4 Reports

Morgan Stanley (MS) and Goldman Sachs (GS) announced their fourth-quarter earnings results Tuesday morning. JPMorgan (JPM), Wells Fargo (WFC), Bank of America (BAC) and Citigroup (C) recorded mixed results on Friday. Morgan Stanley stock rose Tuesday after just beating results. And Goldman Sachs stock fell during trading after recording a massive drop in earnings.

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Banks saw surges in deposits and investments during the coronavirus pandemic’s era of low interest rates and massive federal stimulus support. But investment banking revenue started falling in the second half of fiscal 2021, after the Federal Reserve began hiking interest rates — circumstances that would normally benefit banks.

Morgan Stanley Earnings

Morgan Stanley saw its earnings and revenue fall for the fourth straight quarter Tuesday morning. Still, the New York-based investment bank managed to beat Wall Street forecasts.

Expectations: Analysts expected earnings to drop 37% to $1.24 per share on a 13% decline in revenue to $12.54 billion. Adjusted earnings were seen falling 39% to $1.25 per share from $2.08 per share last year, according to FactSet.

Results: Morgan Stanley reported earnings of $1.26 earnings per share. Revenue fell 12% to $12.75 billion. Adjusted earnings dropped 37% to $1.31 per share, but the results still beat predictions.

The company’s investment banking revenues nearly halved for the period, falling to $1.25 billion from $2.43 billion last year. Net revenue from its wealth management business rose 5.6% to $6.6 billion, driven by a 52% spike in net interest income to $2.14 billion.

During the fourth quarter, Morgan Stanley increased its provisions for credit losses 150% to $87 million as the firm set aside funds to cover potential losses. For the fiscal year, provisions for credit losses rose to $280 million in 2022 from just $4 million in 2021.

MS stock jumped 5.8% on Tuesday following the results. Shares ended Friday up 22% the past three months but down 7.3% over the past year.

Goldman Sachs Earnings

Goldman Sachs earnings fell for the fifth straight quarter and revenue declined for the fourth consecutive period with the company’s Q1 results Tuesday morning.

Expectations: Wall Street saw Goldman Sachs earnings roughly halving, falling to $5.56 per share from $10.81 last year. Revenue was seen declining 15% to $10.76 billion, according to the FactSet consensus.

Results: Earnings plummeted 69% to $3.32 per share as revenue fell 16% to $10.59 billion.

The results were driven by lower revenues from Goldman Sachs’ asset and wealth management and global banking businesses. Asset and wealth management revenue fell 27% in the fourth quarter to $3.56 billion, driven by an 80% drop in equity investment revenue to $287 million. But that was partially offset by a 16% increase in net interest income, to just over $2 billion.

Goldman Sachs also increased its provisions for credit losses by 183% to $972 million during the quarter, a bulk of which were related to its credit card and point-of-sale loan portfolios. For the 2022 fiscal year, Goldman’s provisions for credit losses skyrocketed to $2.7 billion from $357 million in 2021.

Goldman’s earnings announcement comes amid major layoffs for the investment bank. The company is reducing its head count by 3,200 employees, or 6.5% of its total workforce, starting this week, after first announcing the cuts on Jan. 9.

Goldman Sachs stock fell 6.4% on Tuesday following the earnings results. GS stock ended Friday up 25% over the last three months and down 2% over the past year.

You can follow Harrison Miller for more news and stock updates on Twitter @IBD_Harrison.

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