JPMorgan’s Trading Revenues In Q3 Were The Highest Among All Banks Despite Decline

by Trefis Team
JPMorgan Chase
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The third quarter of the year was a fairly weak period for investment banks in the global securities trading industry, as there was a notable reversal in debt and currency trading activity for the period from the upbeat levels seen since Q4 2016, and also because of record low equity market volatility. This had a negative impact on trading revenues for the banks over the quarter, which is seasonally a slow one already.

Total trading revenues for the 5 largest U.S investment banks fell to below $17.5 billion in Q3 2017, making it the slowest period for securities trading since Q4 2015. This represents a ~16% decline y-o-y as well as a 6% slide sequentially. JPMorgan retained the top spot among all banks with total trading revenues of just over $4.5 billion. JPMorgan’s securities trading operations contribute a little over 25% of our $98 price estimate for the diversified banking giant’s shares.

JPMorgan’s dominance in the securities trading industry is evident from the chart above, as its average trading revenues over the last five quarters ($5.1 billion) was 27% ahead of the figure for its closest rival Citigroup ($4 billion). Incidentally, the average revenue figure for the other three banks over this period is nearly identical at $3.4 billion.

JPMorgan has ranked #1 in every quarter since Q4 2010 (except for Q4 2012, when Goldman Sachs grabbed the top spot) primarily due to its strong presence in the global FICC trading industry. The diversified banking giant ended Goldman’s strong grip over the industry before the economic downturn of 2008 thanks to its acquisition of Bear Stearns at the peak of the downturn – leapfrogging it above other industry incumbents. Meanwhile, Goldman’s unusually weak FICC trading performance over the last three quarters (owing to commodities trading losses) has weighed on its total trading revenues.

You can see how changes in JPMorgan’s FICC trading yield impacts our price estimate for the bank by modifying 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 SachsJPMorganMorgan StanleyBank of America | Citigroup

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