We're now well into earnings season, and most major U.S. financial institutions have reported their fourth-quarter results. While many banks didn't give investors any real surprises, there were a couple of standouts. Investment banks Goldman Sachs Group (NYSE:GS) and Morgan Stanley (NYSE:MS) were both big movers after earnings, and in this Industry Focus: Financials clip, host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss which was the winner and which was the loser of fourth-quarter earnings, and what investors should know going forward.

Check out the latest Goldman Sachs and Morgan Stanley earnings call transcripts.

A full transcript follows the video.

This video was recorded on Jan. 28, 2019.

Jason Moser: Matt, we'd talked about a lot of these big banks a couple of weeks ago. We were looking at some of the opportunities and the challenges in the quarter they're reporting. You've gone through these releases, you've seen some of the winners, you've seen some of the losers. Tell our listeners what you found.

Matt Frankel: For the most part, there weren't too many big surprises. Banks, as a rule, are a generally predictable industry, especially commercial banks. Having said that, there were a couple that stood out. Bank of America was, I think, the best out of the big four banks. They just keep improving and keep getting better and better. They're really doing a good job of putting their pre-financial-crisis self well in the rearview mirror. If I'd told you in, say, 2010, 2011, that Bank of America was going to be probably the best-looking out of the big four banks, you would have told me I was crazy.

Moser: I know I would have. Just a year ago, it seemed like Brian Moynihan and Bank of America were stepping in something new on a daily basis. Now, it seems like they've passed that torch on to Wells Fargo, huh?

Frankel: Right. And a few years ago, if I had told you that anyone but Wells Fargo was the best-run bank out of the big four, you would have called me crazy. Times have certainly changed in that regard.

The biggest surprise in my mind to earnings were the two big investment banks, which are generally less easy to predict. So if there's a surprise, a lot of times that's where you're going to find it. Goldman Sachs had a blowout quarter. Goldman had been one of the worst-performing bank stocks because of the drama related to the Malaysia bond fund gone bad. That's still definitely an overhang on the stock, which is why it's trading for significantly less than book value. But the bank, its earnings were excellent. Lending and investing revenue, which includes the Marcus division, was up by 56% year over year.

That's huge, and Marcus is still a very small component of the business. They just announced recently at the Money20/20 conference I was at that they're expanding into wealth management. They've already expanded into personal loans and savings products for Main Street, so now this will bring even more people into their ecosystem. Historically, Goldman's been a wealth manager for the 0.01%, so this is really opening new doors for them. It's been successful so far, plain and simple. They made their first personal loan, just for example, in October 2016. Two years later, they hit $4 billion in personal loans, which is a drop in the bucket in terms of a big bank but is quicker than LendingClub even got to that level. It's impressive growth so far, and tons more room to grow.

CEO David Solomon at a recent presentation said that possible avenues include mortgages, auto loans, insurance products, checking accounts offered online that pay nice interest rates. There's a ton of room to expand this. I've said it before, but I don't think the market appreciates what a big force in commercial banking Goldman Sachs could become. It's got a phenomenal brand name and it doesn't have any of that legacy infrastructure that weighs on profits that any of the other big banks have. It doesn't have branches or anything like that. It has this great opportunity to grow, and it's really been reflected in their earnings.

On the other side of the aisle, Morgan Stanley, their fourth quarter was a big disappointment. It was a standout, one, because bank earnings generally were good. Everyone pretty much beat earnings estimates, beat revenue estimates. Morgan Stanley did not. They missed on both the top and bottom line. Trading revenue was particularly weak. Morgan Stanley's fixed income trading was down 30%. I think Goldman's and a few of the others' were down 18%. So, while trading revenue was pretty weak across the board, it was weaker than peers, which is always a bad sign. If a certain metric is generally terrible and equally terrible, it's not necessarily a bad sign for a company; but when you're underperforming your peers, that's when you want to watch out. That's what happened with Morgan Stanley. Wealth management business missed expectations, as well.

All in all, it just was not a great quarter. When you miss on the top and bottom lines, there's usually a reason for it. There was, it's their trading. Like I said, that's the most unpredictable part of banking, in my opinion, is trading revenue. Don't read too much into one quarter's trading revenue. But all in all, Morgan Stanley was the disappointment, and Goldman Sachs was the winner. Over the past couple of weeks since earnings, you've seen a lot of price divergence between the two.

Moser: Sure. Really quick, going back to Goldman Sachs for a second, it made me think of something I'd like to get your opinion on. Do you feel like Goldman Sachs, given the move to open up their lending to a bigger audience, pursuing Main Street, given Goldman Sachs' reputation, the brand, the aspirational, maybe, nature of that brand from your everyday Main Streeter, do you think there's a parallel with what they're doing with what American Express had to do a little while back in opening their product suite up to more customers, taking that brand that they've had, that they've done so well over so long nurturing, a bit of an aspirational brand, opening that up to more clients with more products? Do you feel like Goldman Sachs benefits from that kind of boost at all?

Frankel: Sure. That's actually a great comparison!

Moser: Why, thank you!

Frankel: For those who aren't familiar, American Express was a credit card for rich people up until a decade ago or something.

Moser: Exactly! I feel like most people on Main Street probably feel like, "Oh, forget about Goldman Sachs, that's just for rich people." But apparently not so anymore, right?

Frankel: Right. And now, anybody with $20 can walk into a Walmart and get a prepaid Amex card. That's the extreme end of their product line, but they've become a credit card company for Main Street. They still have their high-end products. And in my opinion, they're the best in the business at high-end credit cards. The Amex Platinum is, in my opinion, the best credit card product on the market. It's in my wallet right now. But they've done a great job of opening their business up. It's leveraging their brand name.

Goldman Sachs actually has, in my mind, a unique advantage over peers. Not just the brand name. Bank of America, Wells Fargo, these are all good brand names, too. But they all have this big legacy branch infrastructure overhanging their heads. Pretty much all of them are reducing their branch count over the past few years and continue to do so because it's really eating into their costs and eating into their ability to be competitive. If you see Goldman Sachs right now, their Marcus savings account pays 2.25%. Bank of America and Wells Fargo pay about 0.1%. And the reason that they can afford to do that is because they're not paying all these costs associated with branches. Not just the physical buildings, but paper costs, employment costs. There's a ton of costs involved in opening a branch, and Goldman doesn't have to worry about any of that. That, I think, is going to be even more of a competitive advantage than its brand name.

Moser: Earnings season is just getting under way. I'm sure we have more banks coming, but it's definitely been an interesting few weeks thus far.