How Much Did The 5 Largest U.S. Investment Banks Make Through Equity Trading In Q2 2016?

August 30th, 2016 by Trefis Team
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The 5 largest U.S investment banks generated just under $7.4 billion in total equity trading revenues over Q2 2016 – 4% less than what they made a year ago. The lukewarm performance was largely expected, though, due to weak equity market conditions over the first two months of the quarter followed by a sharp decline in equity market values at the end of June from an unexpected Brexit vote. Although the jump in trading activity immediately before and after the Brexit vote would have helped equity trading revenues at the investment banks, the gains would have been erased by mark-to-market losses.

IB_QA_US_EquityTrading_16Q2

Notably, these five banks usually account for between 40-50% of the total global equity trading revenues for any given quarter. Moreover, Goldman Sachs and Morgan Stanley dominate the equity trading business with these banks monopolizing the top two ranks on the list for every quarter since Q1 2011. Morgan Stanley has had the upper hand in recent years, as the sweeping changes it introduced to its business model over 2011-2012 shifted the focus of its business model away from fixed income trading and towards equities.

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In contrast, Citigroup has a considerably smaller equity trading desk – choosing to focus on fixed income trading instead. Citigroup has not made more than $1 billion in equity trading revenues in any quarter since Q1 2011. But the smaller unit coupled with exchange rate exposure for the bank’s geographically diversified operations have made these revenues very volatile – something that explains the sharp 21% jump in Citigroup’s equity trading revenues year-on-year. You can see how changes in Citigroup’s equity trading yield impacts our price estimate for the bank by making changes to the chart below.

See the links below for more information and analysis about the 5 largest U.S. investment banks:

See full Trefis analysis for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

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