Bond trading leads fourth quarter revenue surge at top investment banks

Goldman Sachs, JP Morgan, Morgan Stanley and Citi reported strong growth across trading revenues in fourth quarter in 2016.

Large investment banks have reported a surge in trading revenues in the fourth quarter of 2016, led by a significant increase in fixed income trading activity.

Goldman Sachs saw a 78% increase in net revenues for fixed income, currency and commodities (FICC) trading in the fourth quarter last year, compared to the same period in 2015.

“[FICC] operated in an environment generally characterised by improved market conditions, including rising interest rates and tighter credit spreads,” Goldman explained.

The bank’s institutional clients services business - which includes equities and FICC trading - saw revenues grow 25% to $3.6 billion, compared to the fourth quarter in 2015.

Lloyd Blankfein, chief executive officer at Goldman Sachs, said: “After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved.”

JP Morgan reported similar statistics, with a 32% surge in trading revenues to $5.7 billion in the fourth quarter of 2016, again driven by fixed income activity.

The US investment bank saw fixed income markets revenues increase 31% compared to the fourth quarter in 2015, as equities revenues grew 8%.

“Credit and securitised products revenue reflected increased client risk appetite. Commodities revenue improved on increased client activity in a better energy market,” JP Morgan said.

At Morgan Stanley, sales and trading revenues grew 39% in the fourth quarter of 2016, compared to the same period in 2015.

Fixed income revenues were up from $550 million in 2015, to $1.5 billion in the fourth quarter, again due to “improved market conditions compared with the prior year period.”

Citigroup reported saw its markets and securities services revenues increase 24% to $4.1 billion in the fourth quarter of 2016, with fixed income up 36% compared to the fourth quarter in 2015.

The growth reflected “increased client activity and improved trading conditions in spread products and rates and currencies,” Citi said. 

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