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Profits plunge at Wall Street rivals Goldman Sachs and Morgan Stanley

Wall Street blues: Goldman shares fell 7% after a sharp drop in profits, while rival Morgan Stanley's total revenue for the quarter fell to £10.4bn from 11, £8 billion

Investment Banking Collapse Shakes Wall Street: Profits Plunge at Goldman Sachs and Morgan Stanley

Profits plunged at Wall Street rivals Goldman Sachs and Morgan Stanley as investment banking fees dried up.

Goldman shares fell 7% in New York after last year’s fourth quarter profits fell to £1.1bn from £3.2bn in the same period of 2021.

The figure was also well below analysts’ estimates of £1.8bn. Goldman’s profits for the full year fell to £9.2bn from £17.6bn previously.

The dismal results marked the bank’s fifth consecutive quarter of falling profits as it cut jobs and cut spending as part of its biggest cost-cutting plan since the 2008 financial crisis.

Fees at Goldman’s investment banking division have fallen sharply and, as AJ Bell analyst Danni Hewson said, “trading and trading have been rather on the back burner, inflation and rate hikes have become the primary concern for investors and businesses.”

Goldman’s spending on wages and benefits also rose 16% in the fourth quarter to £3.1bn despite cost-cutting plans.

Boss David Solomon told investors the fourth quarter had been “disappointing”.

Morgan Stanley also saw fourth-quarter profits rise from £3bn a year ago to £1.8bn this time around. But shares rose nearly 8% as the numbers beat analysts’ forecasts.

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Morgan Stanley’s total revenue for the quarter fell to £10.4bn from £11.8bn.

Like Goldman, Morgan Stanley has also been laying off staff, with the bank shedding around 1,800 jobs at the end of last year.

Despite falling profits, the performance of the group’s wealth management arm will support boss James Gorman’s efforts to reduce its reliance on revenue from the volatile investment banking arena.

It will also give food for thought to Solomon, who is trying to replicate the strategy at Goldman Sachs.

The Crypto Crisis Spreads

A crypto bank linked to disgraced Sam Bankman-Fried has fallen after being hit by crashing digital currency markets.

Silvergate Capital, which offers services such as bitcoin-backed loans, posted a loss of £815m for the final quarter of last year, compared with a profit of £15m for the same period in 2021.

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Customer deposits at the bank fell 56% year-on-year to £5.1bn at the end of December.

Silvergate provided services to the crypto mogul Bankman-Fried’s empire before his crypto exchange FTX collapsed in November and was arrested in the Bahamas a few weeks later.

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