“It does look like trading results this quarter will come in better than worst-feared,” said Chris Mutascio, a New York- based analyst at Stifel Financial Corp.’s KBW unit. “It doesn’t mean we’re back. It’s one month, and even with September, we’re at fairly low levels compared with three or four years ago.”
Led by declines at JPMorgan and Citigroup, fixed-income, currencies and commodities trading revenue at the five firms probably fell 7.2 percent to $38 billion in the first nine months, based on company filings and the average of analysts’ estimates. Goldman Sachs, Morgan Stanley and Charlotte, North Carolina-based Bank of America probably did better, with results almost unchanged from a year ago.
Spokesmen for the five banks declined to comment.
JPMorgan, Citigroup
JPMorgan and Citigroup, both based in New York, are hurting the most because of their dependence on interest-rate and currency markets, which are experiencing some of the steepest revenue declines as central banks keep rates low to spur economic growth. JPMorgan is first in rates trading and third in currencies, according to research firm Coalition Ltd. Citigroup Chief Financial Officer John Gerspach has said more than half of FICC revenue at the firm typically comes from those markets.
Even with the declines, JPMorgan and Citigroup are expected to remain the two biggest fixed-income trading firms, with $10.6 billion and $9.72 billion of revenue in the nine months, respectively. Morgan Stanley probably will be the top equities trader with $5.16 billion in revenue and Goldman Sachs the No. 1 investment-banking firm, generating $4.94 billion.
Morgan Stanley, based in New York and led by Chief Executive Officer James Gorman, 56, is the only firm that advised each of the five biggest acquisitions that closed this year, including serving as the sole banker to WhatsApp Inc. in its $18 billion sale to Facebook Inc., according to data compiled by Bloomberg. The firm worked on Alibaba Group Holding Ltd.’s initial public offering, the largest ever, and jumped to fourth place in underwriting U.S. high-yield debt from seventh last year.
Compensation Pools
Goldman Sachs set aside $12.6 billion for compensation and benefits last year, equal to an average of $383,374 for each of its 32,900 employees, data compiled by Bloomberg show. Morgan Stanley allocated $16.3 billion to pay its 55,794 workers, or enough for $291,734 per person. JPMorgan allotted $10.8 billion, or an average of $207,368 for each of its 52,250 corporate and investment-bank employees. Actual pay varies widely within banks to reflect employees’ roles and seniority.
Within fixed income, credit traders were the most positive about their performance, expecting a 13 percent median increase in compensation from last year, according to a survey by New York-based recruitment firm Options Group, which polled 344 traders and sales people in August and September. Interest-rate and foreign-exchange traders predicted no change.