J.P. Morgan, Bank of America Signal Weaker Trading Results -- 2nd Update

By Christina Rexrode and Emily Glazer Features Dow Jones Newswires

Executives at the two biggest U.S. banks signaled Wednesday that second-quarter trading is weakening, bringing to a halt a string of strong quarters that have boosted bank results.

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J.P. Morgan Chase & Co. Chief Financial Officer Marianne Lake said at an industry conference that the bank's second-quarter trading is so far down about 15% compared with a year ago.

Bank of America Corp. Chief Executive Brian Moynihan, speaking at a separate conference, said his bank's second-quarter trading revenue will be down slightly from a year ago. Neither gave specific predictions for the second quarter.

Bank stocks fell following the comments. Shares of J.P. Morgan and Bank of America were down more than 2%. Stock in Goldman Sachs Group Inc., which is more dependent on trading, fell more than 3%. Goldman, too, in recent days has faced criticism over the purchase by its asset-management arm of Venezuelan bonds, leading critics of the government to charge the firm was propping up a strong man.

Goldman doesn't generally give intra-quarter business updates, and Co-President David Solomon declined to do so when he presented at an industry conference Wednesday. He did say "volatility and client activities, which were more subdued in the first quarter, have continued in comparable fashion in the second quarter." Goldman was alone among big banks in turning in a weak first-quarter trading result.

Last year's trading results across the industry were unusual. The year started with a slow first quarter, which is typically the most active, then picked up steam. That was because of unexpected political developments, including the U.K.'s Brexit vote in June and the U.S. presidential election that Donald Trump won in November.

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"Last year...we thought the world had ended, and then the second quarter turned out to be robust, especially June," Mr. Moynihan said.

Brisker trading continued through subsequent quarters into the first three months of 2017. That turnaround helped stop a yearslong decline in fixed-income trading activity, buoying hopes that the worst had finally passed for big, Wall Street banks.

Executives aren't sounding alarms, though, that the second quarter will herald a reversal of that progress. Ms. Lake noted it is normal for second-quarter trading revenue to decline after the typical, seasonal first-quarter surge.

At the same time, market volatility has been at historically low levels in the second quarter in many markets. That signals lower activity, which can also depress revenues.

In terms of particular areas of trading, Ms. Lake said fixed-income trading so far is down and equities are up slightly, particularly corporate derivatives and prime brokerage.

"We're doing decently in a reasonably challenging environment," she said. "Performance is quite good but there's not a lot to trade around right now...there haven't been that many exciting events and we need a few more of them."

While the second quarter will show weakness, Mr. Moynihan said Bank of America's first-half trading revenue would be up 3% or 4% compared with a year ago. That is because first-quarter results were strong.

J.P. Morgan's trading revenue was up 15% in 2016, and Bank of America's was up 5%. Both banks' trading revenue was also up in the first quarter. They are scheduled to report second-quarter results in July.

Liz Hoffman contributed to this article.

Write to Christina Rexrode at christina.rexrode@wsj.com and Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

May 31, 2017 14:03 ET (18:03 GMT)