Investment Banking Backlog: A Potential Boost for Goldman Sachs and Morgan Stanley

Investment Banking Backlog: A Potential Boost for Goldman Sachs and Morgan Stanley

In recent financial reports, several major banks, including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo, have unveiled their earnings, giving us a glimpse into what we might expect from the upcoming earnings announcements by Goldman Sachs and Morgan Stanley, both scheduled to report on Tuesday, January 16.

What Analysts Expect

CFRA Research Director of Equity Research, Ken Leon, has weighed in on these reports, suggesting that there is an “enormous backlog” for investment banking. This could be beneficial for both Goldman Sachs and Morgan Stanley. Furthermore, he expects the asset and wealth management businesses to “shine,” suggesting a strong performance from these sectors in the upcoming reports.

Despite trading being paused due to Martin Luther King Day, global stocks are remaining steady as investors eagerly await significant data, such as US retail sales, Chinese Q4 growth numbers, and UK inflation statistics. Additionally, the forthcoming big bank earnings from Goldman Sachs and Morgan Stanley are being closely watched.

Goldman Sachs’ Anticipated Performance

Goldman Sachs is expected to outperform this week, with its financial results anticipated to surpass consensus forecasts. Market participants predict a possible 3% move in Goldman Sachs shares after the earnings update, indicating anticipation of good news.

Wall Street estimates Goldman Sachs to earn $4.27 per share in Q4 2023, marking a rise from the previous year. Revenues are expected to increase by 3.4% year-over-year, reflecting solid growth in investment banking and fixed income trading revenue.

Investment Banking Backlog: A Potential Boost for Goldman Sachs and Morgan Stanley

Goldman Sachs CEO David Solomon is likely to strike an upbeat tone for the future due to a recovery in deal-making and IPO underwriting, further boosting investor confidence in the bank.

Morgan Stanley’s Predicted Performance

On the other hand, Morgan Stanley’s stock is predicted to have a weaker performance as its Q4 earnings are expected to disappoint investors. Traders are pricing in a 4% move in Morgan Stanley stock following the earnings release, suggesting anticipation of volatility.

Morgan Stanley’s new CEO, Ted Pick, may show caution about forecasting net income growth due to a challenging business environment. The bank currently has a below-average financial health score, which could be a cause of concern for investors.

In conclusion, while Goldman Sachs is poised for a strong performance driven by an upswing in investment banking and wealth management services, Morgan Stanley is grappling with challenges across its key business segments. These contrasting scenarios paint a mixed picture of the banking sector, making the upcoming earnings releases a crucial event for investors.


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