Positive momentum for investment banking

18.04.2017 / 10:51

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Fixed-income trading at Citigroup (C) alone jumped 19% in the first quarter, the New York bank said Friday, while JPMorgan Chase (JPM) reported gains of 17%. That's a promising indicator for the rest of the biggest Wall Street firms, which report quarterly performance this week: Bank of America (BAC) , Goldman Sachs (GS) and Morgan Stanley (MS) .

Fixed-income trading, which typically includes interest-rate swaps that benefit from central bank policy shifts, may rise an average 28% at the five biggest firms, Susan Roth Katzke of Credit Suisse predicted in a note to clients on Thursday.

The bank's fixed-income trading results, which were "better than expected," buoy the bull case for the same businesses at Morgan Stanley and Goldman, Brian Kleinhanzl, an analyst at brokerage Keefe, Bruyette & Woods, said in a note to clients last week.

Fixed-income revenue may rise 12% at Bank of America and 30% at Goldman, both of which report earnings Tuesday, and 75% at Morgan Stanley, which discloses results on Wednesday, he predicted.

"Throughout 2016, the banks' were catching up with the difficult first quarter, which typically is the strongest one for capital markets earnings," Ana Arsov, an associate managing director for Moody's, said in a statement. The 2016 trough was driven by concern about slowing growth in China and worries that plummeting oil prices would drive energy company bankruptcies, though the effects of both waned later in the year.

"JPMorgan's results show positive momentum for investment banking and capital markets earnings on the back of solid debt and equity underwriting and strong fixed income trading revenues," Arsov noted. While that's a positive omen for the rest of 2017, she said, "the direction of tides is unclear on a variety of economic, geopolitical and policy issues on the horizon."

Stefan D. Angelov - Head of Stocks Trading

Varchev Traders

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Positive momentum for investment banking

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