A chart explains why 2022 was so bad for Wall Street bankers: Morning Brief

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Wednesday, January 18, 2023

Through today’s newsletter Miles abroad, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland And on LinkedIn. Read this and more market news on the go Yahoo Finance app.

Goldman Sachs’ (GS) quarterly results Published on Tuesday It marks the end of a year that investment bankers won’t soon want to remember.

The banking world’s biggest brand name reported fourth-quarter earnings per share down 69% from a year ago and full-year earnings per share down 49% from 2021. Earnings at Goldman’s flagship investment banking division fell 48%. whole year.

In a conference call on Tuesday, Goldman CEO David Solomon said: “Our quarter was disappointing and our business mix proved particularly challenging. These results are not what we want to deliver to shareholders.”

These results will come after the bank 6% of workers were laid off The sharpest reaction the industry has ever seen amid a slowdown in contracting resulted from the Federal Reserve raising interest rates in a generation last week.

Shares of Goldman Sachs 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 PATRIK T. FALLON/AFP via Getty Images)

Now, as in any industry, talk to five executives 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 contractors over the past year are straightforward and the following chart illustrates them S&P Global Market Intelligence What hit our inboxes early Tuesday morning sums up the story in one neat picture.

The US IPO market exploded in 2021 and almost stopped in the second half of 2022.  (Source: S&P Global Market Intelligence)

The US IPO market exploded in 2021 and almost stopped in the second half of 2022. (Source: S&P Global Market Intelligence)

In the US, IPO activity in the fourth quarter of 2022 was down 92% from the same period last year.

For the full year, deal volumes fell 86% from 908 IPOs launched in 2021 to 149 IPOs in 2022. The number of fully completed IPOs in 2022 may not match the quarterly numbers in the previous three-month period. year.

While the IPO market is an easy pocket to monitor in the investment banking world, results from Wall Street banks this quarter suggest that this segment of the market isn’t the only one seeing a decline in volumes.

According to Bloomberg reported last weekAfter a big year in 2021, the leveraged debt market also took off in 2022. Richard Sogeb, global head of debt capital markets at Citi, told Bloomberg: “The dislocation is more pronounced and longer-lasting than anything since the Great Financial. Crisis.”

Recessions in cyclical businesses like banking are, of course, part of this or any economic cycle.

Rising interest rates make borrowing for anything — a home, a car, a corporate acquisition — more expensive. That means prospective buyers can either pay more or walk away. On Wall Street, the will was clear last year.

But given the frantic state of business two years ago, the challenges facing the banking world are doubled this time around.

In the spring of 2021, readers may recall, Junior bankers at Goldman Sachs complained With “inhumane” conditions, the aggressive reopening of the economy and interest rates pegged to the floor, teams were pushed to the brink to service the glut of deals flooding the markets.

As a result, junior employees got a pay rise.

At the time, Solomon responded to these complaints By saying: “We’ve always been a pay-for-performance organization. We perform.”

Now, Solomon spins a different story.

It’s not hard to see why.

What to watch today

economy

  • 7:00 a.m. ET: MBA mortgage applicationsWeek ended January 13 (up 1.2% on previous week)

  • 8:30 a.m. ET: New York Central Bank Services Business ActivityJanuary (-17.5 in previous month)

  • 8:30 a.m. ET: Retail AdvancesOver the month, December (-0.9% expected, -0.6% in previous month)

  • 8:30 a.m. ET: Retail sale excluding autosMonth-on-month, December (-0.5% expected, -0.2% in previous month)

  • 8:30 a.m. ET: Retail sales excluding autos and gasMonth-on-month, December (0.0% expected, -0.2% in previous month)

  • 8:30 a.m. ET: Retail Control BoardDecember (-0.3% expected, -0.2% in previous month)

  • 8:30 a.m. ET: PPI final demandMonth-on-month, December (-0.1% expected, 0.3% in previous month)

  • 8:30 a.m. ET: PPI excluding food and energyMonth over month, December (0.1% expected, 0.4% in previous month)

  • 8:30 a.m. ET: PPI excludes food, energy and tradeOver the month, December (0.2% expected, 0.3% in previous month)

  • 8:30 a.m. ET: PPI final demandYear-on-year, December (6.8% expected, 7.4% in previous month)

  • 8:30 a.m. ET: PPI excluding food and energyYear-on-year, December (5.6% expected, 6.2% in previous month)

  • 8:30 a.m. ET: PPI excludes food, energy and tradeYear-on-year, December (4.6% expected, 4.9% in previous month)

  • 9:15 a.m. ET: Industrial productionMonth-on-month, December (-0.1% expected, -0.2% in previous month)

  • 9:15 a.m. ET: Manufacturing (SIC) ManufacturingDecember (-0.2% expected, -0.6% in previous month)

  • 9:15 a.m. ET: Capacity utilizationDecember (79.5% expected, 79.7% in previous month)

  • 9:15 a.m. ET: Commercial goodsNovember (0.4% expected, 0.3% in previous month)

  • 10:00 am ET: NAHB Housing Market IndexJanuary (31 expected, 31 in previous month)

  • 2:00 PM ET: The Federal Reserve publishes the Beige Book

  • 4:00 PM ET: Net long-term TIC flowsNovember ($67.8 billion)

  • 4:00 PM ET: Total net TIC flowsNovember ($179.9 billion)

revenue

  • Charles Schwab (Black), Find financial services (DFS), PNC Financial Services (PNC), Children Morgan (KMI), JP Hunt Transport Services (JBHT), First Horizon Corp. (M.F.A), Alcoa (AA), Wintrust Financial (WTFC), HB Fuller Company (Full), Foreword (PLD)

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