Flat capital market revenues expected for big U.S. banks in Q4 2014

first_img High debt levels threaten banks’ strong results: Fitch Keywords Banking industry U.S. action on climate benefits banks, asset managers: Moody’s James Langton Facebook LinkedIn Twitter G7 tax pledge may be upstaged by CBDC workcenter_img Capital market revenues at the big Wall Street banks is expected to remain unchanged for the fourth quarter of 2014 when they begin year-end reporting this week, says Fitch Ratings in a new report. In the fourth quarter, the revenues from the firm’s various capital market businesses — including fixed income, currencies, commodities, equity trading, and investment banking — for the five U.S.-based global trading and universal banks is not expected to materially change year over year, the rating agency reports. Fitch says that it expects equity trading and M&A revenues to be up meaningfully, but that this will likely be offset by declines in debt and equity underwriting revenue. Related news For the first nine months of 2014, the Wall Street banks have already reported aggregate capital markets revenues that are flat from the same period in 2013, Fitch notes. It says revenues from the fixed income, currency and commodities (FICC) sector, which is typically the most significant contributor to capital market revenues for four of the five biggest U.S. banks (JPMorgan Chase, Bank of America, Citi and Goldman Sachs) are expected to be near flat, or slightly lower on average, reflecting lower trading volumes across product types. Fitch says that currency and commodity trading revenues, within the FICC sector, should receive a modest boost from the uptick in volatility during the quarter. “Declining values for many of the world’s currencies relative to the U.S. dollar and oil’s precipitous decline likely increased client activity, but gains may be offset by erosion in trading book valuations,” it says. For equity trading, Fitch says that the pickup in volatility in late-September through October, combined with upward trending equity indices through the quarter, should drive increases in year-over-year results. “Morgan Stanley could be the biggest beneficiary of higher equity-trading volumes, as they have historically been the largest contributor to the bank’s overall capital market segment results,” it says. In the investment banking segment, Fitch says that fees from global equity underwriting are likely to be lower “as the value of deals declined approximately 20%” compared with the fourth quarter of 2013. Debt capital markets revenue is also expected to be lower, reflecting a 2.8% decline in debt underwriting, globally. However, completed M&A transactions were up approximately 35% year over year, which will translate into a higher advisory fees. As for the seven large European trading banks, Fitch says that it expects their capital markets earnings to follow similar trends. Share this article and your comments with peers on social medialast_img

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