finance
US banks falter in the first quarter
The US financial group Citigroup started the fiscal year with significantly less profit. Photo: Justin Lane/EPA/dpa
© dpa-infocom GmbH
In the corona pandemic, financial groups such as Goldman Sachs did excellent business thanks to flourishing financial markets and posted sharply rising profits. That’s over for now.
War in Ukraine, fears of inflation, downturn on the stock markets: the start of the new financial year was difficult for the US banks, which had been used to success.
The industry giants Goldman Sachs, Citigroup, Morgan Stanley and Wells Fargo had to cope with significant declines in profits in the first quarter. In view of high geopolitical and economic risks, the outlook also looks cautious.
Goldman Sachs
The US investment bank Goldman Sachs was unable to repeat its record profit from early 2021 at the beginning of this year. The bottom line is that shareholders in the most recent quarter received a surplus of $3.8 billion (3.5 billion euros) and thus 43 percent less than in the previous year, as the money house in New York announced.
In the face of growing economic uncertainties, such as those resulting from Russia’s war against Ukraine, Goldman Sachs set aside $561 million for impending loan defaults. A year earlier, she had liquidated such provisions. Meanwhile, the bank’s earnings fell more than a quarter year over year to $12.9 billion in the most recent quarter.
MorganStanley
Goldman’s US rival Morgan Stanley also earned less but fared significantly better. Here the quarterly profit fell compared to the previous year by around eleven percent to 3.5 billion dollars (3.2 billion euros). Revenue fell 6 percent to $14.8 billion. Nevertheless, the results exceeded expectations. The trading business in particular developed better than expected.
On the other hand, classic investment banking, which includes IPOs, mergers and acquisitions, where banks earn money as consultants through fees, weakened. After the boom at the end of the year, there was a great deal of restraint recently in view of the market turbulence caused by Russia’s war against Ukraine and the risk of inflation.
Citigroup
Citigroup also started the fiscal year with significantly less profit. In the first quarter, the surplus fell by 46 percent to 4.3 billion dollars (4.0 billion euros). Total revenue fell just 2 percent to $19.2 billion. In particular, trading in securities such as stocks and bonds proved relatively stable during the stock market downturn.
However, Citi had to cope with balance sheet charges of almost two billion dollars because of the Ukraine war. Unlike most other big US banks, the money house still has a strong business presence in Russia, which has become a problem due to the war and sanctions. Bank boss Jane Frazer also warned in the quarterly report of increasing geopolitical and economic risks.
Wells Fargo
Citi’s competitor Wells Fargo earned just under $3.7 billion in the first quarter, almost a billion less than a year earlier. Bank earnings fell 5 percent to $17.6 billion.
The day before, the largest US money house JPMorgan Chase had already opened the accounting season with weak numbers. High burdens from the Ukraine conflict and weaker day-to-day business caused net profits to drop by 42 percent to around USD 8.3 billion (EUR 7.6 billion).