Majority of US investment banks, asset managers post lower Q1 earnings

Most investment banks, broker/dealers, capital market firms and asset managers in the US reported lower calendar first-quarter earnings on a sequential and year-over-year basis.

Investment banks, broker/dealers and capital market companies

Of the 13 investment banks, broker/dealers and capital market companies that qualified for this S&P Global Market Intelligence analysis, eight logged lower earnings per share quarter over quarter, and nine booked year-over-year EPS declines.

Six of them recorded both year-over-year and sequential drops: Piper Sandler Cos., PJT Partners Inc., Stifel Financial Corp., Evercore Inc., Moelis & Co. and Jefferies Financial Group Inc.

Piper Sandler reported first-quarter EPS of $1.49, compared to $2.25 in the fourth quarter of 2022 and $2.12 in the year-ago period. Persistent inflation, the rapid interest rate hike environment and stress on the banking system resulted in a lack of confidence, and volatility is negatively affecting Piper Sandler businesses that depend on "constructive market conditions and a more stable outlook," Chairman and CEO Chad Abraham said on an earnings call.

In the long term, the ongoing banking turmoil has the potential to "be quite good" for the company's depository business, though it will take some time, the executive added. "That's not going to make a big impact in the next quarter or two."

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The two largest companies on the list by market capitalization, Morgan Stanley and Goldman Sachs Group Inc., posted earnings that were up quarter over quarter but lower year over year.

The only companies in the group that recorded earnings improvement both quarter over quarter and year over year were LPL Financial Holdings Inc. and Interactive Brokers Group Inc.

Asset managers

Of the 15 asset management companies included in the analysis, eight booked sequential decreases in EPS and 10 recorded year-over-year declines.

Six asset managers reported earnings deterioration quarter over quarter and year over year, including the largest asset manager by market capitalization, BlackRock Inc. The asset manager's EPS came in at $7.64, down from $8.29 in the preceding quarter and $9.35 a year earlier.

However, BlackRock benefited from deposit flows out of banks into money management funds having accelerated after regulators closed Silicon Valley Bank and Signature Bank. Those outflows bolstered volume growth in the asset manager's exchange-traded fund and cash management businesses toward the end of the first quarter.

"I believe the current crisis of confidence in the regional banking sector will ultimately fuel another round of growth in the capital markets," Chairman and CEO Larry Fink said on an earnings call. "BlackRock will be an important player."

Blackstone Inc. posted EPS of 11 cents, compared to 75 cents in the fourth quarter of 2022 and $1.66 a year earlier. The company's net income fell as its real estate strategies stumbled during a "turbulent period," said CEO Stephen Schwarzman.

"While there is not widespread distress in the real economy, [the US Federal Reserve's] tightening campaign has led to significant challenges for investors, along with unintended consequences, which we saw with UK pensions last summer [and] more recently in the US and European banking systems," the executive said on an earnings call.

Three asset managers reported sequential and year-over year increases in earnings: WisdomTree Inc., Federated Hermes Inc. and The Bank of New York Mellon Corp. One company, AllianceBernstein Holding LP, posted flat EPS quarter over quarter.