Goldman, M. Stanley profits plunge as dealmaking dries up

The logo for Goldman Sachs appears above a trading post on the floor of the New York Stock Exchange, Tuesday, July 13, 2021. Goldman Sachs reports earnings on Tuesday, Jan. 17, 2023. (AP Photo/Richard Drew)

Electronic signage is shown at Morgan Stanley headquarters, Thursday, March 4, 2021 in New York. Morgan Stanley reports earnings on Tuesday, Jan. 17, 2023. (AP Photo/Mark Lennihan)

NEW YORK (AP) — The profits for two iconic Wall Street firms — Goldman Sachs and Morgan Stanley — plunged sharply last quarter as volatile markets cut deeply into investment banking.

Goldman's profits tumbled 66% to $1.33 billion in the fourth quarter, it said Tuesday, well below what Wall Street had expected. Profits at Morgan Stanley slumped 40% to $2.2 billion, barely beating analyst projections.

Expectations for Goldman and Morgan were already grim after quarterly results last week from JPMorgan Chase, Citigroup and Bank of America.

Goldman on Tuesday disclosed to investors that its consumer banking division was struggling far more than what was previously known publicly. The bank set aside $972 million to cover potential credit losses in the quarter, which the bank said came from higher charge offs in its rather new credit card business.

"Widely expected to be awful, Goldman Sachs’ Q4 results were even more miserable than anticipated," said Octavio Marenzi, CEO of consulting company Opimas LLC, in an email.

It appears Goldman is also scaling back its push to establish a consumer banking business that is part of a company-wide reorganization. The bank disclosed that its consumer banking division had lost $3 billion since 2020 in its consumer lending business.

It is unclear what that means for Goldman's partnership with Apple, which chose Goldman as its bank for the Apple Card. It was hailed as a positive start for Goldman in the consumer business since the bank had no experience running a credit card business. The bank also handles General Motors' co-brand credit card.

Morgan Stanley reported a steep drop in trading and investment banking revenues, but was able to make up for the decline through its wealth management division.