December 6, 2022

Wall Street banks ‘new nature’ in business earnings after two stellar years

On January 3, 2019, a street sign called Wall Street appeared outside the New York Stock Exchange (NYSE) in New York City. REUTERS / Shannon Stapleton / File Photo

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NEW YORK, Jan. 19 (Reuters) – Wall Street banks are expecting business returns to a “new nature” somewhere between pre-epidemic levels and a two-year high, say top executives and analysts.

The Federal Reserve poured large sums of money into the capital markets, leading to unprecedented liquidity and epidemics of trading, with investors seeking opportunities to cash in. But the business income of the leading Wall Street banks fell in the fourth quarter, markets normalized and the central bank measured. Refund its property purchase. read more

Banks with big trading desks like Goldman Sachs (GSN), JPMorgan (JPMN) And Morgan Stanley (MSN) They are the biggest beneficiaries of market volatility, paving the way for traders to enjoy better times since the 2007-09 financial crisis.

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Now, they realize that a favorable market environment will not last forever.

“None of us could have expected the environment we’ve lived in for the past two years, and especially the environment this year, which was obviously a significant setback for our business,” David Solomon, chief executive of Goldman Sachs, later told analysts. The bank released earnings on Tuesday, which were lower than market forecasts. read more

“We do not see it as a permanent environment that will continue at this pace,” Solomon said.

He said the bank still sees “fair” performance in 2022 and business could thrive regardless of market conditions.

Chief Financial Officer Sharon Isaiah said in an interview Wednesday that rival Morgan Stanley did not expect trading levels to return to pre-epidemic levels.

“We have seen a difference in global central bank policies, which should create more active markets,” he said. “We were able to gain market share, which holds us up well as we move into 2022.”

Executives from rival JPMorgan Chase & Co. (JPMN) The country’s largest bank hit a similar tone last Friday after posting disappointing earnings. read more

“In our core case, markets and banks normalized somewhat in 2022 compared to their respective record years in 2020 and 2021, after which they began to grow moderately,” Chief Financial Officer Jeremy Barnum told analysts.

Barnum said trade levels will be further raised in 2022.

“The beginning of the rate hike cycle will be much healthier for fixed income earners,” he said.

Analysts expect the overall environment to be conducive to trade activity, even if it is below the levels of the past two years.

“The menu for 2020 and 2021 is very high,” said Devin Ryan, an analyst at JMP Securities, part of the Citizens’ Finance Committee. “We’ll see some normalization, and the industry is trying to figure out what that normalization will look like.”

On Wednesday, Morgan Stanley said trade revenue fell 26% in the fourth quarter. While stock trading earnings rose 13%, those gains were wiped out by a 31% decline in fixed-income trading earnings, the bank said. read more

Executives at Goldman Sachs, JPMorgan and Morgan Stanley have reaffirmed their optimism about the market share gains achieved during the epidemic as part of the recession of European banks.

Goldman, in particular, focuses on doing more business on behalf of its largest corporate clients.

“Looking at the broader customer base, the wallet share perspective is even more upside down for us,” Solomon said. “We will take a more sustainable share from the market offering opportunity.”

Morgan Stanley’s Isaiah expressed similar sentiments.

“We feel good about having or gaining market share as we look forward,” he said.

Most analysts believe that opportunities for business ventures are better than people expect.

Kush Goyal, a senior research analyst at Newberger Berman in New York, said: “The outlook for the business is very optimistic. It’s not going back to 2019.

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Report by Matt Schufham in New York by Matthew Louise Editing

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