Oh, to have a FICC trading group and a banking team doing billion dollar deals, in 2020.
Wall Street's consumer banks took a crippling 1-2 punch of reduced consumer activity and souring loans, as evidenced with the painful earnings release provided by Wells Fargo ($NYSE:WFC) executives Tuesday. But white shoe Wall Street banks are streamlined, and operating efficiently, and are seeing their prospects shoot past US banks with a heavy dependence on bank branch activity.
In a little less than one year's time, Wells Fargo job postings have declined steadily, and more than 56%, according to data. The West Coast, consumer-focused bank that spent much of the 2010s outpacing Wall Street rivals back east, may suffer the most painful Q2 of any major US bank - losses of $2.4 billion plus a slice to its dividend that must make even Wells' staunchest supporters a little queasy. Wells Fargo's struggle is covered in various data points - revenue slid, and it socked away nearly $10 billion more to cover potential loan losses that come as a result of the current US recession.
What's the biggest difference separating the Wells Fargos of Wall Street, and their nimble, branch-free opponents? Right now, it's a robust trading and M&A business. And Goldman Sachs is on top, this far into earnings.
Dealogic data puts into perspective how much the I-banking advantage matters from a money-making perspective - Goldman, and Morgan Stanley, this year's #1 and #2 M&A banks from a revenue generation standpoint, have generated hundreds of millions more in deal payments than also-rans, many of them US consumer banks struggling to right-size staff amid a pandemic. JPMorgan Chase, which recorded an impressive beat in its Tuesday earnings, also saw investment banking revenue soar in the past quarter.
Yes, Goldman slashed more than 1,000 job postings from its website - but at least the bank has been looking to bring back job postings lately, unlike many consumer rivals.
At white-shoe banks with Wall Street-sized FICC trading teams and league-leading M&A sector squads, however, the pain of the recession is being felt a bit differently. Which is to say, not nearly as much. While Wells Fargo swung to a loss, Goldman's ($NYSE:GS) Wednesday morning earnings beat was driven primarily by the prowess of its trading and dealmaking unit - which is not to say that its Marcus consumer product is struggling, by the way. All-around, Goldman's streamlined business is allowing it to navigate the recession - and the fact that its dealmaking teams are raking in fortunes in a down market is just more fuel for Wall Street analysts' fire.
Data gathered from Goldman's job postings site also reflect an emphasis - however little - on maintaining its golden goose, within its securities division. From lows this year, a handful more job postings have been added - but they're clearly far off highs earlier in 2020. Other parts of the Goldman business seeing a small uptick in job listings include merchant banking and risk analysis.
CNBC's Jim Cramer is on board, saying Goldman's prospects are rocketing past that of other Wall Street banks in the recession: "I think it could end up having the highest multiple in the next couple of quarters," the trading guru said after Goldman's mega-beat.
When a bank crushes numbers, it's not uncommon to hear a call end with 'Great quarter' between analysts and the leadership team. This beat was so broad that most analysts struggled to grasp words to appropriately sum up the West Street bank's success.
If he thinks that's indecent, he should try putting his money with US consumer banks for the next few years, and see how that looks. Lower for longer is going to mean less for investors - especially those tied to big banks.
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.