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Wednesday 18 January 2023
Today’s newsletter is from Myles Udland, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go with the Yahoo Finance app.
Goldman Sachs (GS) quarterly results, released Tuesday, marked the latest milestone in a year investment bankers hate to remember.
The biggest brand name in the banking world reported fourth-quarter earnings per share that fell 69% year over year and full-year earnings per share that fell 49% from the full year.
Speaking on a conference call Tuesday, Goldman CEO David Solomon said, “Put simply, our quarter was disappointing and our business mix proved particularly challenging. These results are not what we want to deliver to shareholders.”
Those results come after the bank laid off 6% of its employees last week in the sharpest reaction the industry has seen so far amid a slowdown in business execution that was attributed to the Federal Reserve’s most aggressive rate hikes in a generation.
Goldman Sachs shares fell 6.4% on Tuesday.
Goldman Sachs Chairman and CEO David Solomon speaks during the Milken Institute Global Conference on May 2, 2022 in Beverly Hills, California. (Photo by Patrick T. FALLON/AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)
Now, as in any industry, speak to five leaders in the banking world and you’ll get 10 different perspectives on the environment, the economy, and customer demand.
But the challenges facing Wall Street’s dealmakers over the past year have been straightforward, and the following chart from S&P Global Market Intelligence, which hit our inboxes early Tuesday, summarizes the story in one clean picture.
The US IPO market exploded in 2021 and virtually ground to a halt in the second half of 2022. (Source: S&P Global Market Intelligence)
In the U.S., IPO activity fell 92% in the fourth quarter of 2022 compared to the same period last year.
For the full year, transaction volume fell 86% to 149 IPOs in 2022 from 908 IPOs initiated in 2021. The number of IPOs completed throughout 2022 would not have reached the quarterly tally in any of the three months of the previous year.
The story goes on
And while the IPO market is the easiest corner of the investment banking world to follow, this quarter’s results from Wall Street banks suggest that this area of the market wasn’t the only one to see volume slumps.
As Bloomberg reported last week, after a record 2021, the leveraged loan market also ground to a halt in 2022 – nothing since the Great Financial Crisis.”
Of course, slowdowns in cyclical businesses like banking are part of this or any other economic cycle.
Rising interest rates make it more expensive to borrow for anything – a house, a car, a business acquisition. That means potential buyers are either paying more or moving on. On Wall Street, the preference was clear last year.
But the challenges facing the banking world are doubly stinging this time given how hectic business was just two years ago.
Readers may recall that in the spring of 2021, junior bankers at Goldman Sachs complained of “inhuman” conditions as teams were pushed to the abyss to service the tide of deals that swept markets as the economy aggressively reopened and interest rates were pushed to the ground .
As a result, junior staff got a raise.
At the time, Solomon responded to those complaints by saying, “We have always been a meritocratic organization.
Now Solomon is spinning a different story.
And it’s not difficult to understand why.
What to see today
business
7:00 p.m. ET: MBA Mortgage ApplicationsWeek ending January 13 (1.2% in previous week)
8:30 a.m. ET: Operations of the New York Fed ServicesJanuary (-17.5 in the previous month)
8:30 a.m. ET: Sales advance in retailMoM, December (-0.9% expected, -0.6% mom)
8:30 a.m. ET: Retail sales excluding carsMoM, December (-0.5% expected, -0.2% mom)
8:30 a.m. ET: Retail sales excluding cars and gasolineMoM, December (0.0% expected, -0.2% mom)
8:30 a.m. ET: retail sales control groupDecember (-0.3% expected, -0.2% mom)
8:30 a.m. ET: Final PPI demandMoM, December (-0.1% expected, 0.3% mom)
8:30 a.m. ET: PPI without food and energyMoM, December (0.1% expected, 0.4% mom)
8:30 a.m. ET: PPI excluding food, energy and tradeMoM, December (0.2% expected, 0.3% mom)
8:30 a.m. ET: Final PPI demandYoY, December (6.8% expected, 7.4% mom)
8:30 a.m. ET: PPI without food and energyYoY, December (5.6% expected, 6.2% mom)
8:30 a.m. ET: PPI excluding food, energy and tradeYoY, December (4.6% expected, 4.9% mom)
9:15 a.m. ET: industrial productionMoM, December (-0.1% expected, -0.2% mom)
9:15 a.m. ET: Manufacturing (SIC) ProductionDecember (-0.2% expected, -0.6% mom)
9:15 a.m. ET: capacity utilizationDecember (79.5% expected, 79.7% in previous month)
9:15 a.m. ET: business suppliesNovember (0.4% expected, 0.3% mom)
10:00 a.m. ET: NAHB housing market indexJanuary (31 expected, 31 in previous month)
2:00 p.m. ET: Federal Reserve publishes Beige Book
4:00 p.m. ET: Long-term TIC net flowsNovember ($67.8 billion)
4:00 p.m. ET: Total net TIC flowsNovember ($179.9 billion)
merits
Karl Schwab (BLACK), Discover financial services (DFS), PNC Financial Services (PNC), Children Morgan (SMI), JB Hunt Transport Services (JBHT), First Horizon Corp. (FHN), Alcoa (AA), Wintrust Financial (WTFC), Company HB Fuller (FULLY), prologue (PLD)
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