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Earnings Results: Goldman Sachs, Morgan Stanley, Citigroup report lower earnings

Goldman Sachs Group Inc., Wells Fargo & Co., Citigroup Inc. and Morgan Stanley all reported lower first-quarter profits on Thursday — but the quartet managed to beat Wall Street’s earnings expectations in a tough start to the year.

Shares of Goldman Sachs
GS,
+0.68%
,
Morgan Stanley
MS,
+0.24%
,
and Citigroup
C,
-0.38%

all rose, gaining back some of their losses for the year. For most of 2022, investors have cast a bearish eye on banks in the face of inflation and the war in Ukraine. Wells Fargo
WFC,
+0.25%

shares fell back after its revenue miss, however.

Goldman Sachs CEO David Solomon described the latest quarter as turbulent and dominated by the Ukraine war.

“The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore and equity issuance came to a near standstill,” Solomon said.

Goldman Sachs Group’s profit dropped to $3.83 billion, or $10.78 a share, from $6.71 billion, or $18.60 a share, in the year-ago quarter.

Revenue at the megabank dropped to $12.93 billion from $17.7 billion.

Goldman Sachs was expected to earn $8.90 a share on revenue of $11.86 billion, according to a FactSet survey.

Shares rose 1.5% in premarket action.

Prior to Thursday’s trades, Goldman Sachs shares were down 15.8% so far in 2022. The stock is a component of the Dow Jones Industrial Average
DJIA,
+1.01%
,
which has fallen 4.9% this year.

Wells Fargo shares retreated by 3.7% after the bank said its first-quarter earnings dropped to $3.67 billion, or 88 cents a share, from $4.64 billion, or $1.02 a share, in the year-ago quarter.

Revenue fell to $17.59 billion from $18.53 billion in the year-ago quarter.
The Wall Street earnings target for Wells Fargo is 81 cents a share on revenue of $17.78 billion, according to FactSet.

The latest quarter includes a decrease of $1.1 billion, or 21 cents a share, in the allowance for credit losses. CEO Charles Scharf said efforts by the U.S. Federal Reserve to tame inflation “will certainly reduce economic growth” along with the impact of the war in Ukraine adding downside risk to the economy.

Citi analyst Keith Horowitz said Wells Fargo’s earnings beat was driven by larger than expected reserve release and equity gains, but it core . Stock looks down pre-market most likely since core pre-provision net revenue (PPNR) missed by about 10 cents to 15 cents relative to expectations largely on higher first-quarter expenses. 

Prior to Thursday’s trades, Wells Fargo shares are up 1.2% so far in 2022, compared to a drop of 6.7% by the S&P 500 and a loss of 4.5% by the Financial Select SPDR ETF XLF.

Morgan Stanley shares rose 0.9% after the investment bank said its first-quarter earnings fell 11% to $3.54 billion, or $2.02 a share, from $3.98 billion, or $2.19 a share, in the year-ago quarter. Adjusted earnings dropped to $2.06 a share from $2.22 a share.

Revenue dipped 6% to $14.8 billion, from $15.72 billion.

Morgan Stanley was expected to earn $1.71 a share on revenue of $14.25 billion, according to a FactSet survey.

JMP analyst David Ryan said stronger revenue, a modestly lower compensation ratio and lower non-compensation expenses drove the bank’s outperformance.

Prior to Thursday’s trades, the stock is down 14.3% so far in 2022.

Citigroup shares rose 1.3% after the bank said its first-quarter profit fell 46% to $4.3 billion, or $2.02 per share from $7.9 billion, or $3.62 per diluted share in the year-ago quarter.

Revenue declined to $19.2 billion from $19.7 billion, as higher net interest income was more than offset by lower non-interest revenue across businesses, the company said.

The bank attributed its drop in net income to higher cost of credit, higher expenses and lower revenue.

The latest quarter’s results included Asia Consumer divestiture-related impacts of approximately $677 million.

Citi beat the analyst forecasts for earnings of $1.43 a share and revenue of $18.19 billion, according to a survey by FactSet.

Prior to Thursday, Citi’s stock was down 17% so far in 2022.

Also Read: JPMorgan Chase profit misses targets as war, inflation and supply-chain issues cause it to boost reserves

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