Bond trading drives Q3 revenue surge for investment banks

Fixed income trading has led to growth in overall revenues in investment banking business units for tier one banks in Q3 this year.

Goldman Sachs revealed this week a 47% increase in third quarter revenues to over $2 billion, driven by a 34% surge in its fixed income trading sales in the same period. 

The investment bank said the increase was "due to significantly higher net revenues in interest rate products and credit products, as well as higher net revenues in mortgages." 

Goldman is the latest tier one investment bank to have reported a surge in fixed income trading sales in the third quarter this year, driving overall growth in revenues across the businesses.

JP Morgan’s corporate and investment banking business unit saw net income surge almost 99% to $2.9 billion in the third quarter this year, compared the same period last year. 

The US bank’s market and investor services business revenue increased 21% to $6.5 billion, driven by a significant 48% bump in fixed income markets sales.

JP Morgan explained that the “rates performance was particularly strong, with good client activity, as markets remained active throughout the quarter, post the Brexit vote and in anticipation of Central bank actions as well as money market reform.”

Chief executive officer and chairman at JP Morgan, Jamie Dimon, said the corporate and investment banking unit “reported its best third quarter revenue.”

A similar scenario occurred at Bank of America as trading revenues grew 14% overall in the third quarter this year, compared to the same period in 2015 – with fixed income trading up 32%.

Brian Moynihan, chief executive officer at Bank of America, said the bank “grew revenue, reduced expenses and continued to manage risk” in the third quarter of 2016.

At Citigroup, fixed income trading revenues surged 35% from $2.5 billion in the third quarter last year to $3.5 billion in the same period this year.

Citi said the increase was “driven by improvement in both rates and currencies and spread products.”

The bank’s markets and securities services revenues were up 11% in the third quarter this year to $4.5 billion, compared to the third quarter last year.

Goldman Sachs, JP Morgan, Citi and Bank of America all beat analysts’ expectations in third quarter results due to the overall growth in trading revenues – particularly bond trading – compared the Q3 last year.