It’s Almost Decision Time…

Bank stocks kicked off earnings on Friday and are back in the spotlight today with Goldman, Morgan Stanley, and Silvergate Capital reporting.

Let’s see what they had to say. 📝

We’re starting with Goldman Sachs, which reported its worst earnings miss in a decade.

The investment bank reported earnings per share (EPS) of $3.32, well below the $5.48 estimated. The 66% plunge in quarterly profit drove the largest EPS miss since October 2011. Driving the weakness was an 11% rise in operating expenses due to higher compensation, benefits, and transaction-based fees. 😮

Additionally, it posted a $972 million provision for credit losses, up nearly 300% YoY and 50% higher than analysts expected. While other banks also set aside funds for credit losses, Goldman’s losses were particularly high due to its poor execution in the consumer banking business. The company plans to continue pulling back efforts in this space, opting to offer these services to its existing wealth management and corporate customers rather than fight for new business.

Revenues also fell short at $10.59 billion vs. the $10.83 billion expected. Investment banking fees fell 48% YoY, and asset and wealth management revenue fell 27%. 🔻

The bank expects the economic backdrop to remain challenging. As a result, in the short-term, its focus is its strategic realignment, scaling its growth platforms, and improving efficiency where it can.

$GS shares were down roughly 6% on the news. 📉

Next up is Morgan Stanley, whose bets in the wealth management space are paying off big time. 👍

The firm reported earnings per share of $1.26, topping estimates of $1.19. Driving the decline in profit were rising costs and charges associated with its cost-cutting measures. 

Revenues of $12.75 billion also beat the $12.64 billion expected. But, like its peers, it saw a 49% YoY decline in investment banking revenue and a 17% decline in its investment management division. Offsetting that weakness was strength in its wealth management business (+6% YoY) and fixed-income trading (+15% YoY).

It also added an $87 million provision for credit losses. However, its consumer business is much smaller than the other banks discussed. 💳

Despite the challenging environment, the firm’s balanced business model helped deliver a return on average tangible common shareholders equity (ROTCE) of 16%.

$MS shares were up roughly 6% and nearing the all-time highs set last year. 📈

Last is Silvergate Capital, the bank caught up in the recent crypto and FTX turmoil. ₿

It reported earnings per share of $0.48, missing estimates of $0.67. Additionally, its revenues of $52.23 million also missed expectations.

The $1 billion Q4 loss comes two weeks after it warned investors that customers pulled more than $8 billion in deposits in the fourth quarter.

The beaten-down bank is evaluating its product portfolio and customer relationships as it looks to restructure its business to focus on profitability. Additionally, it’s aggressively cutting costs, laying off 40% of its workforce. ✂️

The bank made a big bet on the digital assets industry, helping propel its shares to new heights. However, the risks of that bet are now coming to fruition. Its shares are down 95% from their all-time highs and trading near their 2019 IPO price.

$SI shares were initially up 20% on the earnings news but faded throughout the day to close up 1%. 🤷

Six weeks after the Stocktwits community discussed the S&P 500’s downtrend line and 200-day moving average, it’s back again. But this time, it’s in a note from Morgan Stanley.

Carl Quintanilla’s tweet shares some insights from a recent Morgan Stanley research. However, its main point is that the firm believes the market will see lower lows ahead. Their thesis suggests that stocks remain vulnerable until this key resistance level is broken convincingly.

Another thing our community is watching is the “coiling” that’s occurring in the S&P 500. Technical analysts suggest that this pattern signals indecision in the marketplace but that once a direction is picked, then the move will be significant.

Whether prices break out or break down from here remains to be seen. But what’s clear is that it’s almost decision time for the market. ⌚👈

In the meantime, hop over to our Stocktwits post and share your thoughts. 🗯️