Fitch: Volatility Drives FICC Revenues for US GTUBs

NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. Capital Markets Quarterlyhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885818

A rebound in fixed income currency and commodities (FICC) trading from a weak sequential quarter helped lift capital markets revenues for the five US Global Trading and Universal Banks (GTUBS) in 2Q16, Fitch Ratings says.

Fitch's expectation for GTUBs' capital markets business remains mixed. FICC trading is episodic and while Brexit-linked volatility helped support revenues last quarter, it could also risk future growth if protracted uncertainty leads to reduced client trading activity.

Second quarter capital markets revenues for US GTUBs - Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), and Morgan Stanley (MS) - were up by 12% over the first quarter and 6% over last year's second quarter. This was led by improved results in FICC revenues (20% yoy) and debt underwriting (19% yoy). FICC remains the largest driver for GTUBs capital markets business, accounting for 47% of net revenue in 2Q16.

Higher market volatility has not led to a significant increase in risk for the banks. Value-at Risk (VaR) metrics remain near cyclical lows amid ongoing balance sheet de-risking.

Advisory results were the only key segment which reported a decline in revenues from the first quarter. Fitch has noted earnings call commentary from some GTUBs indicating that backlogs are declining and that M&A cycle is in its late stages. That said, advisory remains a small contributor to total revenues relative to FICC, equity markets and debt underwriting, so this should not have a large impact on future results.

Overall market and segment shares for the five banks remain broadly stable with JPM and GS retaining their number one and two spots in terms of revenue share respectively. JPM's dominance in FICC, where it maintains over 30% market share, as well as top rankings in several other capital markets segments, continues to boost its position relative to other institutions. Capital markets activity remains a smaller component of JPM, BAC and C's total revenues and therefore has less impact on their overall business and risk exposure relative to capital than for GS and MS.

Analysis of US GTUBs' 2Q16 Capital Markets revenues including trends and revenue share breakdowns by institution and segment can be found in Fitch's "U.S. Capital Markets Quarterly" report, published today. The report is available to subscribers by clicking the link above or at www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160804005763/en/

Fitch Ratings
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Source: Fitch Ratings

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