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

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The 5 largest U.S investment banks reported equity trading revenues of $27.6 billion for full year 2016. This represents a reduction of 5% from the figure of under $29 billion for the previous year – something that can be attributed to exceptionally strong equity trading activity over the first half of 2015, in contrast to a slowdown in equity trading volumes over the first half of 2016.

IB_QA_US_EquityTrading_FY16

The equity trading revenue figures here have been taken from the earnings release of individual banks. The chart below captures equity 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.

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IB_QA_US_EquityTradingChange_FY16

As can be seen here, 2016 was a considerably strong period for the equity trading industry despite a rather poor start to the year. Notably, these five banks have reported higher total full-year equity trading revenues on just two other occasions in the past – 2007 ($30 billion) and 2015 ($29.1 billion). As equity market volatility is expected to remain elevated in the near future, we expect the associated revenues to jump for 2017.

Morgan Stanley has reported more equity trading revenues than any other bank globally in each of the last three years – a considerable achievement given that Goldman held the top spot in every single year before that at least since 2005. Morgan Stanley implemented what was arguably the most drastic change to its business model among the U.S. banking giants, as it moved away from debt trading and focused almost entirely on equity trading while also integrating the Smith Barney wealth management division acquired from Citigroup. The radical reorganization has definitely worked in Morgan Stanley’s favor over the years, as it now leads the equity trading industry while also being the best capitalized major bank in the world in terms of core capital ratio figures.

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 SachsJPMorganMorgan StanleyBank of America | Citigroup

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