Wall Street braced for a drop in earnings from investment banks

Morgan Stanley building

Two of the world’s biggest banks, Goldman Sachs and Morgan Stanley, are releasing their annual results this week, and are expected to report a fall in annual earnings after a tough year.

Goldman Sachs is forecast to report earnings of $33bn (£23bn), $1.5bn down from last year, while Morgan Stanley is slated to post a fall of 10.3 per cent on a year-on-year basis.

The last 12 months has seen both banks struggle to maintain earnings from fixed-income trading as well as continue to battle against increased regulation and fines relating to the financial crisis. Goldman Sachs last week agreed to pay out $5.1bn over how the bank marketed mortgage bonds ahead of the financial crisis.

Fourth-quarter earnings at the bank are expected to be reduced by $1.5bn as a result of the charge. Investors are also hoping Goldman will issue an update on the health of chairman and chief executive Lloyd Blankfein who was revealed to have cancer in September last year.

Morgan Stanley took a $150m quarterly charge in December and eliminated 1,200 jobs to offset falls in fixed-income trading.

Both banks have a reputation for high payouts to staff, with Goldman traditionally paying out 40 per cent of revenue and Morgan Stanley 47 per cent.

Combined staff, including 6,500 staff at Goldman Sachs in London are expected to share a pay pool of almost $30bn.

Full story: Wall Street braced for a drop in earnings from investment banks: City A.M.

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