How Have Securities Trading Revenues At The 5 Largest U.S. Banks Changed In The Last 5 Years?

February 9th, 2017 by Trefis Team
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The 5 largest U.S investment banks reported total securities trading revenues in excess of $78 billion for full year 2016 – making this the best period for them since 2012. Total trading revenues improved 7% compared to the figure for 2015 thanks to a marked recovery in debt and currency trading revenues over the second half of 2016. The chart below captures total trading revenues reported by the five largest U.S. investment banks since 2012. The green-to-red shading for figures along a row show the variations in these revenues for a particular bank over this period.

IB_QA_US_TotalTradingChange_FY16

Notably, these five banks have reported higher total full-year securities trading revenues on just three other occasions in the past – 2009 ($105 billion), 2010 ($89 billion) and 2012 ($81 billion). It should be noted, though, that the figures for 2009 and 2010 were exceptionally high as market valuation across security classes improved from the lows they reached in 2008. Also, stricter regulatory requirements have weighed on securities trading revenues since 2010 – something that makes the strong revenue figure for 2016 stand out after the string of lukewarm performances over recent years.

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JPMorgan has reported more securities trading revenues than any other bank globally every single year since 2011. The diversified banking giant saw its FICC trading desk swell considerably in size after the economic downturn thanks to its acquisition of Bear Stearns – something that helped it better Goldman’s #1 position in the industry until 2010.

While a bulk of JPMorgan’s trading revenues come from its FICC trading desk, not all of these banks are equally dependent on debt trading to drive profits. The table below shows what proportion of the trading revenues for each bank came from the FICC (fixed income, currencies and commodities) and equity desks in each of the last five years.

IB_QA_US_TotalTradingPropChange_FY16

On average, fixed income operations contribute roughly two-thirds of the total trading revenues for these banks, with equities trading bringing in the remaining third. But there is a lot of variation in this proportion across banks. While Citigroup relies on fixed income trading more heavily than the others (approximately 80:20), Morgan Stanley’s focus is clearly on equity trading. Goldman seems to give both its trading desks roughly the same amount of importance, with the equity trading desk performing better just once in the last five years (2015).

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

Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment / ask questions on the comment section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to the full Trefis analysis for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

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