Another casualty in the Fed’s fight against inflation is a collapse of deals on Wall Street.
Why it matters: Appetite for new money is dwindling as the Fed continues to raise the cost of doing business.
Driving the news: Goldman Sachs reported this morning that its investment banking unit brought in $ 2.1 billion in sales last quarter, down 41% from last year, due to “significantly lower” net revenues in equity and debt underwriting.
- The company’s backlog – its pipeline of deals in everything from underwriting to M&A to strategic advisory mandates – also dropped from last quarter, it said.
The big picture: The downturn has been industrywide.
- Investment banking revenues dropped to $ 1.1 billion last quarter for both Morgan Stanley and Bank of America, a 55% and 47% drop, respectively, from last year.
- Citigroup last week reported a 46% decline in revenue to $ 805 million.
- JPMorgan reported a 32% drop in revenue to $ 788 million.
What to watch: A decline in new deals among bulge brackets like Goldman Sachs means big banks are looking more closely at their expenses, much like tech companies have this year.
- “[W]e have made the decision to slow hiring velocity and reduce certain professional fees going forward, ”Goldman CFO Denis Coleman told analysts on a conference call.
- He added that the company plans to bring back annual performance reviews this year, which are typically used to cull worst-performing staff.