Jamie Dimon 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 was speaking during its Q3 conference call after JPMorgan took a $170m charge-off tied to the Tricolor bankruptcy and 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.
As is customary, JPMorgan revenues towered above the rest of the street in FICC posting US$5.6bn for the quarter.
Jeremy Barnum chief financial officer 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 charge-offs due to apparent fraud like in the Tricolor case.
Jamie Dimon answering the infamous bank analyst from Wells Fargo, Mike Mayo, about the credit issues at First brands et al said: “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 I – 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 fixed income, 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 fixed income markets 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 with management attributing the progress year over year to credit trading. Asked on the call about if there was any reason for pause in any sector regarding credit growth. Both the CFO, Alastair Borthwick and the CEO, Brian Moynihan had a positive outlook 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” and Moynihan agreed saying: “We’re comfortable we’re pushing forward.”
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