Lack of trading activity set to hurt bank revenues in Q2

Analysts at JP Morgan predict further slumps in investment bank revenues as trading floors remain quiet.

A lack of activity on trading floors is likely to see investment bank revenues take a significant hit in the second quarter, according to JP Morgan analysts.

Equities are set to take the biggest hit, with revenues expected to fall around 28% compared to Q2 2015. Overall investment bank revenues are expected to take a 24% hit.

Fixed income, currency and commodities (FICC) is expected to see sales fall around 12%. This follows a severe contraction in FICC business over the past twelve months, which has seen banks cut large numbers of jobs in their FICC divisions.

Equity derivatives are also expected to perform poorly in Q2 financials, largely driven by the continuing weakness of the major Asian economies.

Global volatility has been on the increase since the beginning of the year, when a number of shocks hit markets after Chinese markets saw a series of trading suspensions as investors feared the economy was slowing down and scrambled for the exit.

Equity underwriting is also set to take a hit, dropping more than 60% from last year at some firms, though up slightly from a dire first quarter.

JP Morgan’s top pick was Deutsche Bank, which its analysts said could cut costs faster than investors expect. At the other end, Credit Suisse and UBS are both widely tipped to post major declines in their investment banking and trading revenues for Q2.