Washington: Goldman Sachs was set to post closely watched results Thursday after losses reported by two big banks dampened the mood for a sector struggling to get out from bailouts and the financial crisis.
Bank of America reported worse-than-expected results, while Wells Fargo topped expectations for profits, although analysts said the overall banking sector appeared to be still hampered by difficult economic conditions.
After the mixed results, investment giant Goldman Sachs was set to report its earnings for the fourth quarter and full year early Thursday, amid speculation it may post record profits.
The Goldman results “will be highly scrutinized as a barometer for the financial sector as a whole,” said Beth Gaston Moon at Options News Network.
“In the past, Goldman Sachs has been regarded as a silver lining surrounding its cloudy and troubled peers.”
Bank of America, the largest US bank by assets, posted a loss of $194 million in the fourth quarter of 2009, but repayments of government aid boosted the loss for shareholders to $5.2 billion.
For all of 2009, the bank listed a profit of $6.3 billion, but for shareholders the results were a loss of $2.2 billion.
Bank of America results were affected by a charge of $4.0 billion to repay the US government for its capital aid under the Troubled Asset Relief Program (Tarp), a massive effort to stabilize the banking system.
“While it’s disappointing to report a loss for the fourth quarter, there were a number of important accomplishments worth noting,” said Bank of America chief executive Brian Moynihan.
“First, we repaid the American taxpayer, with interest, for the Tarp investment. Second, we have taken steps to strengthen our balance sheet through successful securities offerings. And third, all of our non-credit businesses recorded positive contributions to our results.”
Moynihan added that the bank was “encouraged by signs the economy is improving,” but noted that “conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.”
Analysts at Deutsche Bank called the Bank of America results “lumpy,” and cited “disappointments” in areas such as fee income.
Morgan Stanley meanwhile reported a profit of 617 million dollars in the fourth quarter, but little was left for shareholders of the investment giant that was rescued by an infusion from Japan’s Mitsubishi UFJ Financial Group.
The profit applicable to common shareholders was $376 million in the quarter.
For all of 2009, the posted profit was $1.346 billion but shareholders suffered a loss of $907 million.
Morgan Stanley’s chief executive and president James Gorman said he was confident that the bank would improve its position further as the economy recovered from the worst recession in decades.
Gorman, along with chairman John Mack, agreed to forgo bonuses for 2009 due to the sector’s woes.
Joe Weisenthal, analyst at the financial website Clusterstock, said the results followed a pattern set by JPMorgan Chase and Citigroup, which reported losses for their lending operations offset by gains in other areas such as trading and investment banking.
Another major bank, Wells Fargo, posted net income of $2.82 billion in the fourth quarter on record revenue of $22.7 billion.
For the full year, Wells Fargo said it had net profit of $7.99 billion on record revenue of $88.7 billion.
The results partly reflected the California-based bank’s takeover of Wachovia in December 2008, making Wells Fargo the fourth-largest US bank by assets. The bank said it had $1.2 trillion in assets at the end of 2009.
Most major banks have repaid the government’s Tarp injections, although Citigroup has converted some of that to common stock, leaving the Treasury with a major stake.
According to Treasury officials, about $205 billion was pumped into 707 banks under the rescue plans.