What Goldman Sachs, JPMorgan, Morgan Stanley, BofA & Citi are saying about the outlook for 2024
Now that the big America banks have disclosed their big results for the entirety of 2023, we have a clearer idea of their intentions for 2024. If you were hoping for revenues and hiring to come roaring back this year, you might be disappointed. But there could be a valiant squawk.
This is what each of the banks in the headline is saying about 2024.
Goldman Sachs: "Pretty optimistic" but also "cautious"
Are cuts planned? Seemingly not. Goldman regularly trims poor performers at the end of each year, but unlike last year when Goldman cut 3,200 jobs in the first quarter, there appear to be no plans to repeat this process. However, as Goldman seeks to reduce its cost/income ratio from 65% to 60% of revenues, CFO Denis Coleman said yesterday that the firm is in the process of, "reviewing each and every category of...non-compensation expense, benchmarking it, reviewing KPIs, thinking about our processes, incentive structures, governance." In other words, cost-cutting is not over, even if layoffs are.
What are they saying about investment banking? Last year, Goldman's M&A revenues fell nearly 30%, while its equity and debt capital markets revenues rose 36% and fell 2% respectively. CEO David Solomon said yesterday that things are improving, that he's "pretty optimistic," and that the M&A pipeline experienced "strong replenishment" in the fourth quarter. "The level of strategic dialogue has definitely increased," Solomon declared, before adding that activity is unlikely to the year average "right away."
Equity and debt capital markets bankers possibly have most to look forward to this year. Firms need funding again, said Solomon: "They've got to start thinking about their capital structures and accept the reality of the market, and we're seeing that come through."
Across M&A, Solomon said Goldman is focused on the "long view", implying that it's not about earning fees immediately, although that would probably be nice.
What are they saying about sales and trading? Last year, Goldman's equities sales and trading revenues rose 5% and its fixed income sales and trading revenues fell nearly 18%.
Solomon said it was a quiet quarter for fixed income trading intermediation, particularly in November and December, but that things are improving. There's been more activity in the first few weeks of the year, and they're keeping an eye on that.
What are they saying about technology spending? Goldman spent $1.9bn on communications and technology last year, up 6% from the year before.
Where are they growing? Private credit. Equity financing.
Goldman is "very focused on private credit", said Coleman. Although it's grown there already there's still an opportunity to "grow and scale." The firm already has $110bn of private credit investments and wants more.
Equity financing [prime broking] is a similar area of focus. When you finance clients' activities you "get rewarded in other ways through the ecosystem," observed Solomon. Equities financing has already grown significantly and there are opportunities to grow further with existing clients and to onboard new ones, said Coleman.
JPMorgan: 'We are hiring'
Are cuts planned? Again, apparently not. Daniel Pinto said earlier that JPMorgan will be hiring this year, although he wasn't talking about the investment bank in particular.
What are they saying about investment banking? JPMorgan's M&A and debt capital markets (DCM) revenues both fell 8% last year. Equity capital market (ECM) revenues rose 11%.
This year, JPMorgan CFO Jeremy Barnum says he expects ECM revenues to "rebound" although he added that problems with 2023 IPOs might create a few problems "converting the pipeline."
In DCM, Barnum said lower rates "could go both ways" as firms either refinance now or wait to see whether rates go lower.
In M&A, Barnum said things are "picking up" but there are "nuances" and regulatory headwinds. "The extent as well as the timing of capital markets normalization remains uncertain," he added.
What are they saying about technology spending? We covered JPMorgan's recent comments on technology spending here. Last year, technology spending at the bank fell 1% to $9.2bn but Barnum said spending is rising and there's a disciplined focus on AI, although JPM will not be chasing shiny things.
Where are they growing? Wait until the May investor day for this to be made clear.
Morgan Stanley: Not chasing market share for the sake of it
Are cuts planned? No. Last year, Morgan Stanley cut 3,000 people. This year, it seemingly has no intention of repeating that, even though costs consumed 92% of revenues in the investment bank in the final quarter when one off charges are included.
Speaking yesterday, Morgan Stanley's new CEO Ted Pick said there is "no strategic decision at all to withdraw from the investment bank, but that he was comfortable with giving up market share and not simply chasing share for the sake of it in some investment banking businesses. This might imply that Pick will be willing to withdraw from marginal businesses with high capital costs. It's all about "the preservation of capital."
What are they saying about investment banking? CFO Sharon Yeshaya said "optimism is growing" along with the advisory and IPO pipeline. Energy, real estate and technology deals are strongest; sponsors activity is lagging.
Where are they growing? There was no mention of growth in the investment bank. The enthusiasm is all for wealth management.
Bank of America: Very few people are leaving
Are cuts planned? No, but Bank of America may still have more staff than it wants. It hasn't said this explicitly, but speaking to investors last week, BofA CEO Brian Moynihan said the bank's turnover rate was just 6% in the fourth quarter of 2023, half its usual rate of 12% and below the 7% average for the full year. This was "very low," declared Moynihan. Given that people aren't leaving, BofA can "manage headcount down just by not hiring people," he added.
What are they saying about investment banking? There's a "full pipeline" but not necessarily all that much clarity on when it will start moving. Middle market deals are strong. Ultimately, BofA expects investment banking revenues to return.
What are they saying about sales and trading? Last year was a record, BofA has gained market share. 2024 has started strong and 2023 is a baseline for expansion.
Citi: Big, big cuts coming
Are cuts planned? Yes, 5,000 people in Q1 followed by 15,000 people through to 2026. We have all the details here.
What are they saying about investment banking? Citi CEO Jan Fraser said dealmaking activity should "accelerate" in 2024. There's "good momentum in health care and technology" and signs of a return to form in Citi's "areas of traditional strength" (energy and industrial) said Fraser, adding that DCM is recovering too.
Where are they growing? Even while Citi cuts 20,000 people, it plans to keep hiring in risk, controls and technology.
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