Banks' first-quarter trading revenue prompts cautious optimism

Tue Apr 21, 2015 12:03pm EDT
 
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By Anjuli Davies and Jamie McGeever

LONDON (Reuters) - Trading revenue from the world's biggest banks showed signs of recovery in the first quarter as financial market volatility boosted dealing room profits after years of attrition.

Though income has been only modestly higher than the same period last year, the numbers have prompted cautious optimism from analysts holding out hope for a return to trading returns last seen before the 2007/08 financial crisis.

Earnings so far from the five leading U.S. banks and Credit Suisse in Europe show that revenue from fixed income, currencies and commodities (FICC) almost doubled from the previous quarter to $17.1 billion.

Quarter-on-quarter improvement was to be expected, given that the first three months of the year are typically the strongest for investment banks as cash is put to work. However, analysts have been encouraged by FICC numbers that were flat year on year. FICC accounts for about half investment banks' revenues.

Total revenue at the U.S. quintet and Credit Suisse from FICC, equities and investment banking fees was $34.98 billion, up a modest 5.9 percent from the same period last year, according to Christopher Wheeler, U.S. banks analyst at Atlantic Equities.

"FICC is showing some signs of life but that is because rates are back, commodities are back and there's been more volatility surrounding events like the Swiss franc cap. This is positive given the dull FICC markets in recent years," Wheeler said.

The first quarter has been notable for the Swiss National Bank's removal of its cap on the Swiss franc, the European Central Bank's trillion-euro bond-buying quantitative easing (QE) program, speculation over U.S. interest rates and a rollercoaster ride for oil prices.

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The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, January 20, 2015.   REUTERS/Mike Segar