Last Friday, we saw strong earnings from banks and that expected increase in interest rates will translate into higher bank revenue. But today, Goldman Sachs and Charles Schwab gave us a reality check that wage inflation is impacting banks at a greater rate and other increased expenses will hinder on earnings as inflation has reached a 40-year high.

GOLDMAN SACHS (GS)

premarket shares dropped by 8.3% after equities desk revenue fell short by $300 million, below the $2.43 billion estimate. Expenses also rose by 23% to 7.27 billion for Q4, largely due to increased pay and benefits for its employees. However, overall revenues of $12.64 billion were well above the estimate of $12.08 billion but with a such a large miss on earnings, GS shares fell to a new 6-month low.

Goldman Sachs Price Chart

Created by Kaithleen Pesantez

CHARLES SCHWAB (SCHW)

increased profits from last year but fell short of estimates. Earnings came in at $0.86 vs $0.88 expected and revenues missed by -1.33%, printing at 4.71 billion vs the 4.77 billion expected. Contributors to the miss were primarily from a combination of lower-than-expected trading revenues and higher rates of inflation.

Charles Schwab (SCHW) Price Chart

Created by Kaithleen Pesantez