The benefits of Goldman Sachs and Morgan Stanley fell sharply in the fourth quarter of 2022 and in the whole of the year, according to figures published this Tuesday by both entities.
The two firms are highly dependent on the investment banking business, whose income plummeted due to the low rate of fixed and variable income issuances, the halt in mergers and acquisitions due to the economic deterioration, the rise in interest rates and the the stock market crash.
The profit of Goldman Sachs fell 49% in 2022, to 10,764 million dollars (about 9,920 million euros at current exchange rates).
The main reason is the 48% drop in the juicy income from its investment banking business, which plunges 48%, to 7.36 billion dollars.
Income from other transactions is also falling and the rise in interest rates is not enough to offset this burden.
The bank, in addition, has disappointed in the results of the fourth quarter, in which the benefit plummets 69%, to only 1,326 million dollars.
The deteriorating business has caused Goldman Sachs to undertake the biggest wave of layoffs since the financial crisis, affecting more than 3,000 employees.
The entity has been increasing its workforce in recent years and during the pandemic it had even stopped recurring dismissals due to performance evaluation.
In the fourth quarter of last year, the adjustment began and the workforce fell from 49,100 to 48,500 employees, according to figures published this Tuesday.
As for Morgan Stanley, its profit fell 27% in the year as a whole, to 11,029 million dollars.
Investment banking income has also fallen by almost half, going from 10,272 million in 2021 to 5,235 million in 2022. The dynamics have continued in the fourth quarter of the year, in which profit has fallen by 40% , up to 2,236 million dollars.
Even so, its executive president, James P. Gorman, points out through a statement that these are "solid" results in "in a difficult market environment" and in the face of a "complex macroeconomic context."
The poor results of Morgan Stanley and Goldman Sachs come after the four largest entities (JP Morgan, Bank of America, Citi and Wells Fargo) published last Friday an aggregate drop in their profits of 25% in 2022. In their case, the determining factor was the increase in provisions to deal with possible credit defaults given the worsening economic prospects.
The central scenario handled by JP Morgan, the largest bank in the United States, is that of a mild recession during 2023.
If those of Goldman Sachs and Morgan Stanley published this Tuesday are added to the results of the four entities, the result is a 28% drop in the joint profit of the six entities in 2022.
