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Investment banks kick off another earnings season

Financial institutions will be under scrutiny this week as the new earnings season has begun.

The earnings season will continue next week with further reporting from large banks and financial industry companies. Morgan Stanley and Goldman Sachs will release their quarterly results on Tuesday, followed by Charles Schwab, PNC Bank, Discover Financial Services, and others later in the week.

Morgan Stanley’s numbers slow notably

In its forthcoming quarterly report, this investment bank is anticipated to announce quarterly earnings of $1.25 per share, representing a year-over-year drop of 39.9%. Over the past 30 days, the mainstream EPS prediction for the quarter has decreased by 2.05% to the present level of $1.25.

When estimating a company’s future earnings, analysts frequently evaluate the extent to which prior consensus expectations have been met. Therefore, it is worthwhile to examine the history of surprises in order to gauge their impact on the forthcoming figure.

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In the last quarter, Morgan Stanley delivered quarterly earnings of $1.53 per share, above analyst forecasts of $1.51 per share, representing an earnings surprise of +1.32%.

Three times in the past four quarters, the firm has exceeded consensus EPS projections. Revenues are anticipated to be $12.17 billion, a 16.2% decrease from the same period last year.

Goldman Sachs is also affected

GS is scheduled to report earnings for the fourth quarter and full year of 2022 on January 17, prior to market opening. Quarterly revenues and profitability are anticipated to have decreased year over year for the bank.

In the previous week, the consensus estimate for fourth-quarter earnings was reduced by 4.2% to $5.25. It indicates a 51.4% annual decline.

Also, the average forecast for quarterly sales of $10.52 billion suggests a 16.8% decline.

In the preceding four quarters, the company’s profits exceeded the consensus forecast three times and fell short once, for an average positive surprise of 8.84%.

Goldman Sachs Group will slash around 3,200 employees beginning this week, changing course after four years of growth as a poor economy and sluggish dealmaking may have halved annual earnings in 2022.

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After increasing its personnel by more than a third to 49,000 over the previous four years, the company is laying off around 7% of its total employees, primarily from its banking and trading operations. During the epidemic, Goldman halted its annual layoff of unproductive staff.

According to the data of Dealogic, global investment banking fees decreased by over half during the first three quarters of 2022, from $132 billion in 2021 to $77 billion.

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