Fixed income trading revenues fell for most US banks in the second quarter, with JP Morgan CEO Jamie Dimon warning that the strong environment firms have been getting used to could be about to change.
“It’s getting close to as good as it gets. We just don’t know how long it’s going to last,” Dimon said during JP Morgan’s earnings call, when questioned on the risks that could be ahead.
JP Morgan retained its top spot among its fixed income trading competitors, despite a 14% decline quarter-on-quarter (QoQ) and just a 7% increase year-on-year (YoY), with US$6.1 billion.
Chief financial officer Jeremy Barnum noted particular strength in credit, rates and emerging market currencies.
Of the cohort, only Goldman Sachs saw fixed income trading revenues increase QoQ, up 17.5% QoQ and 34% YoY to US$4.6 billion. This put the bank in third place among its competitors, closing in on Citi.
CEO David Solomon noted the firm’s strong performance in the midst of ongoing volatility in the rates space.
Just ahead with US$4.7 billion, Citi took second place with revenues down 17% QoQ and up 9% YoY. Growth was the result of activity in spread products, rates and currencies, the bank said during its results call.
Gonzalo Luchetti, chief financial officer, commented, “Spread products and other fixed income was up 25%, driven by growth across both financing and credit trading in spread products, as well as growth in commodities. Rates and currencies was up 1% with growth in currencies on higher volumes reflecting strong client engagement, primarily offset by lower revenues in rates.”
Bank of America held steady from Q1, closing Q2 at US$3.5 billion.
Across the FICC space more broadly, BofA reported its strongest quarter for more than a decade, according to chief financial officer Alastair Borthwick.
“Overall, we feel good that the credit quality is high, that the underwriting we see is high,” noted CEO Brian Moynihan. “Some of the impact of more leveraged loans outside the banking system is mitigated as that practice straightens itself out over time.”
Morgan Stanley ended the first quarter of the year just a touch behind Bank of America, but a 26% QoQ decline left it the furthest behind BofA it has been in a year. The bank still saw some YoY growth, up 13.6% with US$2.5 billion.
During its results call, chief financial officer Sharon Yeshaya noted,“Fixed income underwriting revenues were a record $788 million driven by bond issuance across non-investment grade and investment grade companies.”
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