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One chart explains why 2022 was so grim for Wall Street bankers: Morning Brief


This article first appeared in the Morning Brief. Get the Morning Brief delivered straight to your inbox every Monday through Friday at 6:30 AM ET. Subscribe

Wednesday, January 18, 2023

Today’s newsletter is over Miles Udland, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and further LinkedIn. Read this and more market news along the way Yahoo Finance app.

Goldman Sachs’ (GS) quarterly results posted Tuesday served as the final marker of a year investment bankers won’t soon remember.

The largest brand name in banking reported fourth-quarter earnings per share that fell 69% from a year ago and full-year earnings per share that were 49% lower than in 2021. full year.

On a conference call Tuesday, Goldman CEO David Solomon said, “Simply put, our quarter was disappointing and our business mix proved particularly challenging. These results are not what we want to offer our shareholders.”

These results come after the bank laid off 6% of its employees last week in the sharpest reaction the industry has seen yet amid a slowdown in closing deals due to the Federal Reserve’s most aggressive rate hikes in a generation.

Goldman Sachs shares fell 6.4% on Tuesday.

David Solomon, Chairman and CEO of Goldman Sachs, speaks at 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)

David Solomon, Chairman and CEO of Goldman Sachs, speaks at 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, talk to five banking executives and you’ll get 10 different perspectives on the environment, the economy and customer demand.

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But the challenges Wall Street dealmakers faced last year were simple, and the following chart came out S&P Global Market Intelligence that landed in our inbox early Tuesday morning, sums up the story in a clear picture.

The US IPO market exploded in 2021 and came to a virtual standstill in the second half of 2022.  (Source: S&P Global Market Intelligence)

The US IPO market exploded in 2021 and came to a virtual standstill in the second half of 2022. (Source: S&P Global Market Intelligence)

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

For the full year, deal volumes were down 86% — from 908 IPOs launched in 2021 to 149 IPOs in 2022. The number of IPOs completed throughout 2022 would not match the quarterly figure in any three-month timeframe of the previous quarter. year.

And while the IPO market is the easiest pocket of the investment banking world to follow, Wall Street banks’ results this quarter suggest that this part of the market wasn’t the only one seeing volumes plummet.

Like Bloomberg reported last weekthe leveraged lending market also stalled in 2022 after a peak year in 2021. As Richard Zogheb, global head of debt capital markets at Citi, told Bloomberg, “The disruption is more pronounced and longer than anything since the Great Financial Crisis. .”

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

Rising interest rates make borrowing money for anything – a home, a car, a business takeover – more expensive. Which means potential buyers pay more or move on. On Wall Street, the preference was clear last year.

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But the challenges facing the banking world are poignant this time, given the hectic state of the business just two years ago.

In Spring 2021, readers may remember: junior bankers at Goldman Sachs complained of “inhumane” conditions as teams were pushed to their limits to handle the plethora of deals that flooded markets as the economy reopened aggressively and interest rates were pegged to the floor.

As a result, junior employees received an increase.

At that moment, Solomon responded to these complaints by saying, “We’ve always been a pay-for-performance organization. We perform.”

Now Solomon is running a different story.

And it’s not hard to see why.

What to watch today

Economy

  • 7 a.m. ET: MBA Mortgage Applicationsweek ended January 13 (1.2% over last week)

  • 8:30 a.m. ET: New York Fed Services business activityJanuary (-17.5 in previous month)

  • 8:30 a.m. ET: Progress in retailmonth-on-month, December (-0.9% expected, -0.6% last month)

  • 8:30 a.m. ET: Retail sales excluding carsmonth-on-month, December (-0.5% expected, -0.2% last month)

  • 8:30 a.m. ET: Retail sales excluding cars and gasolinemonth-on-month, December (0.0% expected, -0.2% last month)

  • 8:30 a.m. ET: Retail sales control groupDecember (-0.3% expected, -0.2% last month)

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

  • 8:30 a.m. ET: PPI excluding food and energymonth-over-month, December (0.1% expected, 0.4% last month)

  • 8:30 a.m. ET: PPI excluding food, energy and trademonth-over-month, December (0.2% expected, 0.3% last month)

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

  • 8:30 a.m. ET: PPI excluding food and energyannualized, December (5.6% expected, 6.2% during previous month)

  • 8:30 a.m. ET: PPI excluding food, energy and tradeannualized, December (4.6% expected, 4.9% during previous month)

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

  • 9:15 a.m. ET: Production (SIC) ProductionDecember (-0.2% expected, -0.6% last month)

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

  • 9:15 a.m. ET: Company inventoriesNovember (0.4% expected, 0.3% last month)

  • 10 a.m. ET: NAHB housing market indexJanuary (31 expected, 31 in previous month)

  • 2:00 PM ET: Federal Reserve releases Beige Book

  • 4:00 PM ET: Long term net TIC flowsNovember ($67.8 billion)

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

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Revenue

  • Karl Schwab (SCHW), Discover financial services (DFS), PNC financial services (PNC), Kids Morgan (RMI), JB Hunt Transport Services (JBHT), First Horizon Corp. (FHN), Alcoa (AA), Wintrust Financial (WTFC), H. B. Fuller Company (FULL), Prologis (PLD)

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