Jamie Dimon, CEO at JP Morgan, warned that recent corporate blow-ups may presage wider credit issues: “When you see one cockroach, there are probably more… everyone should be forewarned of this one.” Dimon speaking during JP Morgan Q3 conference call, after the bank took a US$170m charge-off tied to the Tricolor bankruptcy, said the bank has “re-examined its controls.”
Bank of America, Citigroup, JPMorgan, Goldman Sachs and Morgan Stanley all reported that their rates divisions drove FICC results while FX lagged.
JPMorgan FICC revenues led the rest of the street, posting US$5.6bn for the quarter.
Jeremy Barnum, chief financial officer (CFO), said, “In markets, fixed income was up 21% year-on-year, with higher revenues in rates and credit, as well as strong performance in securitized products.”
He also flagged some wholesale charges due to apparent fraud like in the Tricolor case.
Jamie Dimon responded to the Wells Fargo bank analyst, Mike Mayo, about the credit issues at First Brands, saying, “Whenever something like that happens we scour all process, all procedures, all underwriting, all everything, and we think we’re okay in other stuff. But my antenna goes up when things like that happen. And I probably shouldn’t say this, but when you see one cockroach, there are probably more.”
Goldman Sachs delivered US$3.47bn of FICC revenue, up 17% YoY.
CFO Denis Coleman summed up the results on the call saying: “FICC net revenues were $3.5 billion, up 17% year-over-year, with intermediation driven by rates, mortgages and commodities, partially offset by currencies and credit.”
Morgan Stanley printed US$2.2bn of revenues in FICC, up 8% YoY. In its results presentation, management said: “Fixed Income net revenues increased from a year ago primarily driven by credit on higher client activity and lending growth and commodities on increased structured transactions, partially offset by lower results in foreign exchange.”
Citigroup’s FICC revenue for Q3 was US$4bn, down 6% QoQ but up 12% YoY. The bank was the only one of the five to not flag weakness in currency trading.
CFO Mark Mason said: “Fixed Income revenues increased 12%, with rates and currencies up 15% and spread products up 8%.”
He mentioned elevated policy uncertainty as a tailwind for rates activity. Citi also disclosed average 99% one-day VaR at $117m (flat QoQ but up from $107m a year earlier).
Bank of America reported FICC revenue of US$3.1bn, up 5% YoY but down 5% QoQ with management attributing the progress year-over-year to credit trading.
Both the CFO, Alastair Borthwick and the CEO, Brian Moynihan had a positive outlook on credit growth, at odds with Dimon’s message.
Borthwick said: “The broad message we need to send to people right now is the credit portfolios are performing very well at this point.”
Moynihan agreed saying, “We’re comfortable we’re pushing forward.”
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