Banks Say Trading Is Taking Another Hit -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 6, 2017).

Bank executives are flagging another tough quarter for trading as quiet markets again hurt a key Wall Street business.

Bank of America Corp. Chief Executive Brian Moynihan said at a banking conference in New York on Tuesday that trading revenue is likely to fall about 15% in the fourth quarter compared with the year-earlier period.

At the conference, JPMorgan Chase & Co. finance chief Marianne Lake also said trading revenue is expected to fall 15% in the quarter.

Ms. Lake said there are "not many catalysts," and volatility remains "low across the spectrum." Her remarks encapsulate what has been a tough year for banks. Trading revenue has consistently declined versus the prior-year period, with the biggest falloff mostly occurring in the area of fixed income, commodities and currencies.

Trading revenue has dipped 4.4% for the five large banks with major investment-banking operations, as a group, in the first three quarters of the year, compared with the year-earlier period.

That is largely because volatility remains near lows, despite the constant drumbeat of political and geopolitical developments that typically would spur market activity.

One big drag on volatility: Although the Federal Reserve has been raising short-term interest rates, longer-term rates continue at superlow levels in many countries, including the U.S., and inflation continues to remain subdued.

Against that backdrop, and without specific catalysts in sight that might produce big changes in rates, many investors are sitting on their hands.

To be sure, JPMorgan has still had relatively good performance in fixed income, currencies and commodities. Ms. Lake said she is "very, very confident" the bank will maintain its market share, though she didn't specify figures.

She added that the bank is making progress steadily on the equities side of the trading business, pointing to growth in prime and cash equities, among other areas.

Merger and capital markets activity also has been relatively strong, which should continue to offset the trading performance.

Mr. Moynihan said that investment banking was strong in the quarter and that fees in the segment were on track to rise "midsingle digits" in the quarter from the year earlier.

Write to Emily Glazer at emily.glazer@wsj.com and Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

December 06, 2017 02:47 ET (07:47 GMT)