Investment Banking Revenue Expected To Have Taken a Big Hit In Q4 (GS, MS, JPM)

Wall Street analysts are cautioning investors that investment banking earnings have suffered a fourth-quarter slowdown around Christmas due to the falling of fixed-income revenues, according to a report in the Wall Street Journal that comes just days before the financial sector is set to start its reporting season.

J.P. Morgan (NYSE: JPM) and Morgan Stanley (NYSE: MS) both issued reports on the banking industry on Tuesday where they estimated a drop in revenue for investment banks in the final three months of 2009. Barclays Capital and Citigroup also recently published reports that the revenues were likely to drop ahead of the bank reporting season.

A 27 percent drop in fourth-quarter fixed-income revenues was forecasted by J.P. Morgan, including a 30 percent fall for fixed-income divisions in the quarter for banks Credit Suisse (NYSE: CS), Goldman Sachs Group Inc. (NYSE: GS) and BNP Paribas.

At Morgan Stanley, analysts are forecasting a drop in the range of 22 percent to 41 percent in trading revenues from fixed income currencies and commodities, with overall trading revenues dropping by a quarter for banks such as Bank of America Merrill Lynch (NYSE: BAC), Citigroup (NYSE: C), and J.P. Morgan (NYSE: JPM).

The reports added that the equity revenues for these banks to fall at an average of 11 percent in earnings.

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