Citigroup Is The Only Bank Giving JPMorgan A Run For Its Money In FICC Trading

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The third quarter of 2018 was an overall weak period for the global FICC (fixed income, currencies and commodities) trading industry, as a sequential reduction in debt market volatility, coupled with seasonally weak activity levels, led to a notable decline in FICC trading revenues for most global investment banks. Citigroup, however, stood out with a notable increase in these revenues sequentially as well as year-on-year – something that can be attributed to the bank’s strong international presence. In fact, Citigroup’s total FICC trading revenues of $3.2 billion were a good 13% ahead of market leader JPMorgan’s quarterly tally of $2.84 billion.

The five largest U.S. investment banks reported $10.6 billion in total FICC trading revenues over the third quarter of 2018 – a decline of 3% compared to the figure of $10.9 billion a year ago, and also 11% below the $11.9 billion they generated in the previous quarter. 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 in 2018, thanks to a significant increase in demand for debt and currency trading services. This is evident 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.

JPMorgan has largely dominated the global FICC trading industry since late 2010, after an initial hiccup linked to its acquisition of Bear Stearns at the peak of the downturn. In fact, the largest U.S. bank has generated more FICC trading revenues than any other investment bank globally in 27 of the last 32 quarters – something that stems from its strength in the debt trading industry in the U.S. and Europe. Citigroup was at the top of the list in the the other five quarters, as its larger geographical footprint has helped it gain from positive trends in developing markets over the years. More importantly, Citigroup has outperformed JPMorgan in three of the last six quarters. With FICC trading activity in key nations like China, India, Brazil and Mexico likely to grow at a much higher rate over the coming years than the mature U.S. and European markets, Citigroup looks set to challenge JPMorgan for its spot as the industry leader in the near future.

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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