Goldman Sachs notches worst annual profit in four years, 24% drop from 2022

Goldman Sachs posted its lowest annual profit since 2019 following losses from a failed expansion into consumer banking — one of two Wall Street giants along with Morgan Stanley that reported a hit to their earnings Tuesday.

The drag to Goldman’s bottom line came despite the bank posting fourth-quarter earnings that beat analyst expectations, Goldman CEO David Solomon told analysts.

The bank reported net income of $8.5 billion for 2023 — a 24% drop from 2022 and the lowest level the bank has seen in four years.

However, for the quarter ending December 31, year over year profit increased 51% to $2.01 billion, and revenue jumped 7% to $11.32 billion — beating the $10.8 billion analysts had predicted.

Its better-than-expected quarter came after eight consecutive quarters of earnings declines amid a dramatic retreat from the company’s retail banking efforts.

While Goldman tried to build out its consumer business over the last few years, it has had to largely scrap those efforts and sell off chunks of its consumer lending business.

One bright spot was the bank’s asset and wealth management division — a group Goldman has focused on building up — which saw revenue jump 23%.

Goldman stock jumped nearly 2% at the market open — climbing to more than $384 per share.

Solomon acknowledged the difficulties the bank faced in 2023 on an earnings call after the earnings report — but said the company was set up for a better year ahead.

“This was a year of execution for Goldman Sachs,” Solomon, who took over for Lloyd Blankfein in 2018, said in a statement. “With everything we achieved in 2023 coupled with our clear and simplified strategy, we have a much stronger platform for 2024.”

Goldman Chief Financial Officer Denis Coleman also painted a rosy picture for the year ahead — and said that just two weeks into the year, there seems to already be more solid market activity.

The bank slashed thousands of jobs over the last year, decreasing payroll by 7%.

Goldman, like its other peers, also had to set aside money for a Federal Deposit Insurance Corp. fee to replenish a fund used to help depositors after a bank failure. The fund needed to be restored after being drawn down following the failures of Silicon Valley Bank and Signature Bank.

Goldman wasn’t the only bank with disappointing news Tuesday.

Morgan Stanley said its profits plunged 32% year over year to $1.5 billion as the bank posted $12.9 billion revenue, compared to the $12.77 billion predicted.

Net income fell to $1.5 billion, or 85 cents per diluted share, in the three months ended Dec. 31, compared with $2.2 billion, or $1.26 per diluted share, a year earlier.

“We remain constructive on the year ahead,” new CEO Ted Pick said in his first earnings conference call after taking the helm from James Gorman this month.

Morgan Stanley slumped nearly 4% to $86 per share following the news.

While revenue for investment banking and wealth management grew year over year, the bank was hit by two one-time charges. 

The bank paid a $249 million settlement to the Securities and Exchange Commission to settle a probe into disclosure of block trades. 

Morgan Stanley also set aside $286 million for a Federal Deposit Insurance Corp. fee to replenish the fund used to help depositors after a bank failure.