How Much In FICC Trading Revenues Did The Largest U.S. Banks Report In Q2?

by Trefis Team
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The five largest U.S. investment banks made $11.9 billion in total FICC (fixed income, currencies and commodities) trading revenues over the second quarter of 2018. While this represents a 7% jump compared to the $11.1 billion figure a year ago, it is well below the $14.5 billion figure they collectively reported for the seasonally strong first quarter. Notably, FICC trading revenues have been upbeat over recent quarters thanks to a significant increase in demand for debt and currency trading services from the unusually weak levels seen over the second half of 2017.

We capture the trends in FICC trading revenues in detail as a part of our interactive model on how trading revenues for the largest U.S. banks have changed over the years. We highlight key observations related to their FICC trading revenues below.

The global FICC trading industry has seen secular changes since the economic downturn, as stricter regulations have had a fundamental impact on the level of activity in the industry. Besides restrictions on proprietary trading activities, a key factor that has led these revenues lower since 2012 is the Federal Reserve’s opposition to investment banks trading commodities over fears of market manipulation. Although there was a spike in FICC trading activity over Q2 2016 – Q1 2017, things slowed down again for the rest of 2017 before improving again in 2018. This is seen clearly in the chart below, which captures changes in FICC trading revenues for each of the five largest U.S. investment banks over the last five quarters.

Citigroup stands out as the only investment bank here to report a year-on-year reduction in FICC trading revenues. This can be attributed to the fact that the geographically diversified banking giant benefited considerably a year ago from increased securities trading activity in developing nations – especially in China. That said, Citigroup and JPMorgan have dominated the global debt trading industry over recent years, with Citigroup leveraging its larger geographical footprint to gain from positive trends in developing nations, while JPMorgan has dominated the industry in the U.S. and Europe.

Notably, Goldman reported a 44% jump in FICC trading revenues compared to Q2 2017 – something that can be attributed to its unusually weak performance a year ago. Goldman’s commodities trading unit recorded one of its worst ever quarterly performances in Q2 2017, which nullified gains from strong rates and currency trading activity.

Details about how changes to Securities Trading Fees affect the share price of these banks can be found in our interactive model for Goldman Sachs | Morgan Stanley | JPMorgan Chase | Bank of America | Citigroup

Additionally, you can understand the impact of  Investment Banking Fees on the share price of these banks in our interactive model for Goldman SachsJPMorganMorgan StanleyBank of America | Citigroup

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