Across the board banks have reported increasingly positive equities performances, a notable development following turbulent recent times.
Jane Fraser
While equities performance either grew or remained flat across the sell-side, the banks posted less impressive growth in fixed income, however. The banks appear to be in agreement that while their posted revenues demonstrate a solid foundation for continued growth, there is no accounting for the increasingly unpredictable nature of the global markets thanks to various macro and socio-economic factors.
JP Morgan Chase & Co
JP Morgan Chase & Co’s results saw its markets segment, composed of corporate and investment bank’s (CIB) fixed income markets and equity markets, down 5% as fixed income saw a downturn of 7% and equity remain flat.
Fixed income markets revenue was $5.3 billion, down 7%, driven by lower activity in rates and commodities compared with a strong prior year, partially offset by higher revenue in securitised products. Equity markets revenue was $2.7 billion, flat to the prior year.
Markets & securities services (MSS) revenue saw a lesser decrease, down 2% to $9.2 billion thanks to the securities services revenue having increase 3% to $1.2 billion.
Moreover, the bank’s overall gross investment banking and markets revenue was posted at $913 million, a 4% increase.
Speaking in the Q1 earnings conference call, Jeremy Barnum, chief financial officer for JP Morgan Chase, addressed the effects of market uncertainty on the bank’s markets segment.
“In general the sort of volatility and uncertainty in the rate environment overall on balance is actually supportive for the markets revenue pool and I think that, together with generally more balance sheet deployment, as well as sort of some level of natural background growth, is one of the reasons that the overall level of markets revenue has stabilised at meaningfully above what was normal in the pre-pandemic period.
“[…] We’ll see how the rest of the year goes. But it sort of seems to be behaving relatively normally.”
Citi
Citi’s results also painted a clear picture when it came to its trading state of play. While overall markets revenues decreased 7% to $5.4 billion – notably driven by the lower revenue in fixed income, this was partially offset by growth in equity revenues.
Equity revenue increased 5% to $1.2 billion thanks to key growth across cash trading and equity derivatives specifically, while fixed income revenue decreased by 10%.
The 10% decrease saw fixed income revenue reach $4.2 billion in large part due to rates and currencies on lower volatility and a strong prior-year comparison. However, according to Citi, this was partially offset by strength in spread products and other fixed income – up 26% as a result of client activity.
Further, Citi posted an investment banking revenue of $903 million, up 35% – largely driven by debt capital markets and equity capital markets, “as improved market sentiment led to an increase in issuance activity”.
“We saw good client activity in equities and in spread products, where both new issuance and securitisation activity were particularly robust. We fully integrated our financing and securitisation capabilities within our markets business and we started to see the benefits of having a unified spread product offering for our clients,” said Citigroup managing director Jane Fraser speaking in the Q1 earnings call.
Jefferies
Jefferies’ results saw a net revenue of $1.74 billion, posting its third best quarter for capital markets ever – again in large part thanks to stronger performances in equities.
Speaking in its report, the bank highlighted that the increase to $712 million net revenue for capital markets is “primarily due to stronger performance in equities attributable to increased volumes and more favourable trading opportunities.”
At the same time, while capital markets revenue was up 8.8% year on year (up 47.9% from Q4 2023), fixed income net revenues remained consistent from year on year.
Chief executive, Richard Handler and president, Brian Friedman highlighted that the bank expects the investment banking momentum to continue looking ahead to the rest of 2024. They also added that the asset management segment, which saw a new revenue of $288 million, was a good area for Jefferies.
“Asset management [has] performed well, as we are seeing improved performance from our diversified platform of offerings.”
Wells Fargo
Wells Fargo saw its noninterest income increased 17% thanks to growth across various areas, including a higher trading revenue in its ‘markets’ business.
Overall, markets increased 2%, “driven by higher revenue in structured products, credit products, and foreign exchange, partially offset by lower revenue in rates and commodities,” said the bank.
Specifically, the bank reported its fixed income, currencies, and commodities (FICC) area as one, with an increase of 6%, while equities saw a standalone increase of 3% year on year.
Additionally, Wells Fargo’s corporate and investment banking division, which saw its revenue increase by 2%, encompasses key products and services, including: corporate banking, investment banking, treasury management, commercial real estate lending and servicing, equity and fixed income solutions, as well as sales, trading, and research capabilities.
These results however are arguably to be taken with a light pinch of salt as the market remains precarious and increasingly unpredictable, with future results set to be affected by a range of geopolitical and macro goings on.
There are some key factors that may yet affect banks’ results and outcomes, including: actual/perceived liquidity deficiencies, geopolitical conflict both in Europe and the Middle East, key elections set to take place in major jurisdictions, central bank actions and revised monetary policies.
These continued periods of heightened volatility therefore make for an interesting road ahead across equity, fixed income, FX and beyond.