Wall Street dealmaking collapses amid market plunge

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.

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