https://www.wsj.com/finance/banking...d-wealth-management-58b28520?mod=hp_lead_pos2 Link graphics are better Revenue from investment banking and trading, Goldman’s traditional powerhouses, were down By AnnaMaria Andriotis and Charley Grant Updated Jan. 16, 2024 1:42 pm ET 14 A Goldman Sachs building in New York. PHOTO: JUTHARAT PINYODOONYACHET FOR THE WALL STREET JOURNAL Goldman Sachs GS 0.04% reported sharply higher earnings for the fourth quarter, giving the Wall Street Goliath a boost after a run of lackluster results. Profit was up 51%, a welcome change after eight quarters of declines. But the strength wasn’t in Goldman’s traditional powerhouses, investment banking and trading. Instead, it was asset and wealth management, where Goldman Chief Executive David Solomon has pinned much of its hopes. The unit reported a 23% jump in revenue, while revenue from both investment banking and trading were Solomon has been working to make the bank less reliant on the up-and-down fortunes of those two businesses. One focus has been on expanding the steady business of managing money for people and companies. Fourth-quarter results showed that the turnaround plan could have legs—giving a break to Solomon, who has been under fire from Goldman partners who have criticized some of his plans. Investors have at times complained that Goldman needed to be more clear about what it is trying to be. Rival Morgan Stanley’s revenue was up, but shares dipped about 4%. “This was a year of execution for Goldman Sachs,” Solomon said in a call with analysts. Solomon also said that the bank had been “narrowing our strategic focus.” Goldman has been retreating from its once-grand ambitions to make loans to the masses, an unwinding that has dented profit in previous quarters. Goldman shares were up 0.8% in afternoon trading. “For me, it was a very solid quarter, but I think the more important point is that the market is showing optimism with respect to 2024 prospects for Goldman Sachs,” said Kurt Feuerman, chief investment officer of Select U.S. Equity Portfolios at AllianceBernstein , a Goldman shareholder. Other big banks were down. Shares for Morgan Stanley MS -4.68%decrease; red down pointing triangle , which also reported earnings on Tuesday, dipped more than 4%. Quarterly profit was down 32% at Morgan Stanley, hurt by one-time charges. When Goldman Sachs entered the credit card space in 2019, many consumer banks were concerned that a new competitor had emerged. But now the firm is pulling back. We explain why the challenge now is to turn one strong quarter into sustained success. Its full-year profit fell 24%, worse than every other big U.S. bank except Citigroup . Full-year profit at JPMorgan Chase , meanwhile, shot up 32% to a record $50 billion. Michael Farr, chief market strategist at Hightower Advisors, which holds Goldman shares, said he supports Goldman’s exit from consumer lending, and praised the bank’s return to core businesses. Goldman “should own what it is and highlight its nimbleness and dynamism,” he said. Still, Farr was underwhelmed by the full-year results. “Overall, 2023 was a disappointment as management navigated a difficult environment as well as its own self-inflicted wounds,” he said. Return on equity was 7.5% for the year, down from 10.2% in 2022. Goldman continued to back further away from consumer lending. The bank on Tuesday confirmed that it is parting ways with credit-card partner General Motors . The Wall Street Journal reported in November that Goldman was planning to unload that account. The GM credit-card business lost $65 million on a pretax basis in 2023, the bank said Tuesday. The Journal also reported in November that Apple is pulling the plug on its partnership with Goldman. The Apple deal includes a credit card and savings account. Though Goldman is cutting back on Main Street lending, it is expanding its lending to wealthy individuals and institutional clients. Revenue in equities financing, which includes lending to hedge funds that want to borrow for stock purchases, increased 15%. Revenue in FICC financing, where loans are made to private-equity firms and other companies, rose 4%. In the asset and wealth management unit, where Goldman lends to extremely wealthy families and individuals, revenue from private banking and lending hit a record $2.6 billion for the full year. All the Wall Street banks have been wading through a two-year lull in dealmaking, thanks to high interest rates. Bankers say they began seeing signs of a pickup in M&A during the last few weeks of 2023, particularly in energy and healthcare. January volume so far is higher than this time last year, bankers said. Still, Goldman did worse than its peers in investment banking. Its revenue there fell 12%, while rivals including Morgan Stanley posted gains. Goldman’s trading revenue was down 3%, also worse than most rivals. The bright spot, asset and wealth management, was boosted by a strong stock market and record management and other fees. Goldman’s focus on managing money for others isn’t far removed from the playbook of its arch rival. James Gorman, the former CEO of Morgan Stanley, doubled down on wealth management more than a decade ago, as a ballast against more volatile Wall Street businesses. Revenue was flat in Morgan Stanley’s wealth management unit, which is showing signs of softening. Net new assets in wealth management totaled $47.5 billion, down 8% from a year ago. Morgan Stanley finance chief Sharon Yeshaya said that wealth management’s focus is on growing the number of clients and transitioning them to fee-based advice. “We’re going to see the benefits of scale,” she said. “That is what we’re trying to accomplish and that will increase margin sustainability over time.” For the year, wealth management made up 49% of Morgan Stanley’s revenue. Asset and wealth management made up 30% of Goldman’s revenue. Both banks carried out their plans to cut staff. Goldman finished the year with 45,300 employees, down 1% from the end of September and 7% from the end of 2022. Morgan Stanley ended the year with 80,000 employees, down 1% from the end of September and down 3% from the end of 2022. Citigroup said last week it plans to cut 20,000 jobs. Like other big banks, Goldman and Morgan Stanley had to set aside money to pay a special Federal Deposit Insurance Corp. fee. That money is meant to replenish a fund that the government used to make uninsured depositors whole when Silicon Valley Bank and Signature Bank failed last year. Morgan Stanley also took a $249 million charge related to a block-trading settlement. Overall, Goldman’s quarterly profit was about $2 billion. Revenue was $11.3 billion, up 7% from a year ago. That beat the $10.8 billion expected by analysts. Morgan Stanley’s quarterly profit was $1.5 billion. Revenue of $12.9 billion, up 1% from a year ago, also beat expectations.