The BareStory
Goldman Sachs and Morgan Stanley reported fourth-quarter financial results on Thursday that exceeded profit expectations, leading to significant share price increases for both Wall Street institutions.
Goldman Sachs posted a 12% rise in profit to $4.62 billion, or $14.01 per share, surpassing analyst estimates. However, the bank’s total revenue dipped 3% to $13.45 billion. The firm attributed the revenue decline to financial impacts from offloading its Apple Card loan portfolio to JPMorgan Chase and the early termination of its partnership with Apple. Despite this, the bank’s equities trading division outperformed, generating $4.31 billion in revenue, a 25% increase from the previous year.
Morgan Stanley reported net income of $4.40 billion, or $2.68 per share, on revenue of $17.89 billion, beating expectations on both measures. The results were driven by the company’s wealth management unit, which achieved record annual net revenue, and a rebound in investment banking. Investment banking revenue surged 47% to $2.41 billion, which the firm credited to higher advisory fees resulting from increased merger and acquisition activity.
Following the earnings releases, both banks saw their stock prices reach new 52-week highs. By the close of trading on Thursday, Morgan Stanley shares had gained 5.78%, while Goldman Sachs shares rose 4.63%.
During an earnings call, Goldman Sachs CEO David Solomon also revealed that the bank is actively exploring opportunities within prediction markets. Solomon stated that a dedicated team is studying platforms that allow investors to trade contracts based on event outcomes, noting that oversight by the Commodity Futures Trading Commission makes the sector "super interesting" for potential integration.
How it may affect me
As a U.S. reader:
• Investment portfolios exposed to the financial sector may increase in value as Goldman Sachs and Morgan Stanley stocks hit 52-week highs following strong profit reports.
• Apple Card users will see the management of their loans shift to JPMorgan Chase as Goldman Sachs unwinds its consumer finance partnership with Apple.
• The corporate sector may experience increased consolidation, as indicated by Morgan Stanley's 47% surge in investment banking revenue driven by higher merger and acquisition activity.
• Traders may eventually gain access to regulated platforms for betting on event outcomes as Goldman Sachs explores opportunities within prediction markets.
