When Goldman Sachs (GS) posted weak results, its problems are unique. The company pushed too quickly into consumer banking at the worst time.
The economy is slowing because inflation is rising. The Fed responded by raising interest rates to fight inflation. Consumers have less disposable income. Their savings are drying up, hurting their spending power. Goldman entered the consumer-facing business when consumption neared a peak.
The firm took a massive $1.8 billion in expenses. Goldman will need to re-evaluate its Apple Card account, which started in 2019.
Investors should consider JPMorgan Chase (JPM) instead. The firm has a better handle on credit card delinquency. In Dec., this rate increased only slightly to 0.76%, up from 1.13% in Dec. 2019.
Morgan Stanley (MS) is another solid financial holding. The company posted revenue of $12.7 billion, down by 12.5% Y/Y. The company has a strong net interest income ahead. The higher rates rise, the more beneficial it is to interest income.
In 2023, banks will need to manage the risk of net interest margin compression and tough credit losses. However, Morgan Stanley has a strong Wealth Management business.
Your Takeaway
MS and JPM stocks are the two best bank stocks to consider. GS stock has ongoing risks that will hurt its performance.
