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The Week Ahead: Will Morgan Stanley and Goldman Sachs Rebound?

commercial-falling-moneySeveral financial institutions including JPMorgan Chase, Wells Fargo, Citigroup, PNC, and U.S. Bancorp have all released their Q4 and year-end earnings statements with varying degrees of success. Citigroup led the pack with nearly a ten-fold increase in its net earnings from the previous year, from $344 million up to $3.3 billion. PNC and U.S. Bancorp saw declines in their mortgage revenues in Q4.

Many in the mortgage industry will be watching this week to see how Bank of America, Morgan Stanley, and Goldman Sachs performed in Q4 and for the full year of 2015. Bank of America and Morgan Stanley release their statements on Tuesday, and Goldman Sachs will follow on Wednesday. In Q3, Bank of America beat financial expectations with a profit of $4.5 billion amid falling legal expenses and lower operating costs.

On the flip side of that coin, Morgan Stanley and Goldman Sachs posted disappointing results in Q3. For Morgan Stanley, net income in Q3 totaled $1.0 billion compared to $1.7 billion in the same quarter a year earlier. Morgan Stanley Chairman and CEO James P. Gorman said that “Volatility in global markets in the third quarter led to a difficult environment, impacting in particular our Fixed Income business and our Asia Merchant Banking Business.”

For Goldman Sachs, net earnings in Q3 plummeted by 36 percent year-over-year, from $2.24 billion down to $1.43 billion (though they were up by 36 percent over-the-quarter). CEO Lloyd Blankfein said that Goldman had “experienced lower levels of activity and declining asset prices during the quarter, reflecting renewed concerns about global economic growth.” On the positive side for Goldman Sachs, investment banking revenues totaled $5.48 billion through the first three quarters of 2015, the largest year-to-date total for nine months of any year since 2007.

Will Bank of America continue its hot streak in Q4? The fourth quarter began inauspiciously for the bank when declining delinquent mortgage loan volume forced the elimination of 100 jobs from its Legacy Asset Division in its headquarter city of Charlotte, North Carolina.

Will Goldman Sachs and Morgan Stanley bounce back from the disappointments they experienced during Q3?

Also this week. . .

The National Association of Realtors’ Existing-Home Sales report for December 2015 comes out on Friday, January 22.  The industry will be waiting to see if they will rebound from November’s unexpected downturn, when the pace of sales tumbled to 4.76 million annually—the slowest pace of sales in 19 months.

The delay in closing on loans caused by the TRID rule, which went into effect on October 3, was primarily to blame for the downturn in existing-home sales—through declining inventory has also been an issue. Analysts believe existing-home sales will pick back up as the TRID backlog clears; Realtor.com Chief Economist Jonathan Smoke stated that “The good news is that we should see the closing disruptions dissipate over December and January as the delayed closings turn into an increase in sales for subsequent months.”

On the calendar this week

  • Monday, January 18—Martin Luther King, Jr. Day
  • Tuesday, January 19—Bank of America and Morgan Stanley release Q4 2015 earnings statements; NAHB releases Housing Market Index
  • Wednesday, January 20—Goldman Sachs releases Q4 2015 earnings statement; U.S. Census Bureau and HUD release Housing Starts report
  • Thursday, January 21—The Bureau of Labor Statistics releases Jobless Claims report
  • Friday, January 22—National Association of Realtors Releases Existing-Home Sales report; SunTrust Bank Q4 earnings statement

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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