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Low volatility blamed for poor investment bank results

Both Citi and JP Morgan cite low volatility as cause of falling markets revenue.

By John Bakie john.bakie@strategic-i.com July 14, 2017 1:30 PM GMT

JP Morgan has seen revenues in its markets and investor services business fall by over 11% in Q2 compared with Q1 2017.

Total sales for the markets and investor services business, which forms part of JPM’s corporate and investment bank division, dropped from $6.5bn in Q1 2017 to just $5.76 billion in Q2. It was also down a similar amount year-on-year, having also seen revenues of $6.5 billion in Q2 2016.

The markets business was particularly badly affected with sales down 14%, of which fixed income markets revenue dropped 19%, driven by lower revenue in rates, credit and commodities. JPM said the business suffered reduced flows driven by sustained lower volatility and tight credit spreads.

Equity markets fared better, down just 1%, while securities services revenue grew 8% to $982 million.

Citi also saw declining revenue, with markets a securities services sales falling 5% to $4.4 billion. Citi said falling markets revenues were offset by high revenue in securities services.

Citi’s fixed income markets sales dropped 6% to $3.2 billion, primarily due to lower G10 currencies revenue and low volatility. It also highlighted activity around the UK’s decision to leave the EU last year drove the second quarter of 2016 to record particularly high revenue numbers.

Equity markets revenue fared even worse, down 11% to $691 million. Securities services, by contrast, increased 10% to $584 million.