Tough equities year tarnishes bank Q4 results

In a year which saw dramatic losses at major Wall Street banks and falls in the equities markets, Citi was worst hit yet Morgan Stanley seemed to pull through relatively unscathed.

In a year which saw dramatic losses at major Wall Street banks and falls in the equities markets, Citi was worst hit yet Morgan Stanley seemed to pull through relatively unscathed.

Citi’s Q4 2011 equity revenues fell 60% year-on-year to US$240 million, with the bank blaming declining equity market volumes as clients reduced activity levels in the face of market uncertainty. Annual revenues from equities fell 21% to US$2.8 billion from US$3.5 billion in 2010.

“Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment,” said Vikram Pandit, CEO, Citi.

Return on assets for Citi’s institutional clients group, securities and banking, dipped to 0.07% in Q4 from 0.1% in Q4 2010.

At Morgan Stanley, equity sales and trading net revenues were US$1.3 billion for the fourth quarter – a drop of around 35%. Yet full year equity sales and trading net revenues of US$6.8 billion gave a year-on-year rise of 40%. Return on equity across all business units for the full year was 3.9%.

“For the past year, Morgan Stanley has made enormous progress by addressing a number of outstanding strategic and legacy issues,” said James Gorman, chief executive.

Bank of America Merrill Lynch (BAML) also felt the effects of a weak market. Equities sales and trading revenue at BAML was US$660 million in Q4 2011, sharply falling US$127 million from the year-ago quarter. The bank said this was primarily driven by lower volumes and commission related revenue. Return on equity for the global banking and market was 5.54%, compared to 6.94% in Q4 last year.

At Goldman Sachs, net revenues in equities were US$1.69 billion for Q4, 15% lower than the same period in 2010 and US$8.26 billion for the year, 2% higher than 2010. Goldmans said along with lower net revenues in equities client execution for the quarter, the figure also reflected lower commissions and fees. Goldmans saw a return on equity for Q4 of 5.8% compared to 11.5% last year.

Earlier in the earnings season, J.P. Morgan said its own equity markets revenue for the quarter was US$779 million, down 26% from the prior year, but remaining steady at US$4.8 billion for the year. Return on equity for the investment bank was 7% for the quarter, less than half the 15% return on equity in Q4 2010.

Knight Capital, the New Jersey based broker and a major aggregator of US retail order flow, said Q4 institutional sales and trading revenues were down 8% over Q4 2010. Electronic execution services revenues were up 9% and pre-tax earnings up 17%. Companywide, the firm filed earnings of US$40.2 million for the fourth quarter of 2011, more than a fourfold increase from the US$9.2 million in earnings filed for the same period last year, largely on the back of market making activities, where revenues were up 69% and pre-tax earnings up 181%.

 

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