Fixed-income trading rebounded in the second quarter at Wall Street’s big firms, but the outlook for the capital markets business remains uncertain, says Fitch Ratings in a new report.
The New York-based rating agency reports that capital markets revenues were up by 12% in the second quarter for the five big U.S. global trading banks (Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley), over the previous quarter. Revenues were also up 6% from the same quarter in 2015. Fitch says the increase was powered by a resurgence in fixed-income currency and commodities (FICC) trading, which was up 20% year over year, and debt underwriting, which was up 19%.
Fitch says that its expectation for the banks’ capital markets business remains mixed. “FICC trading is episodic and while Brexit-linked volatility helped support revenues last quarter, it could also risk future growth if protracted uncertainty leads to reduced client trading activity,” the company states in its report.
Advisory results were the only key segment that reported a decline in revenues from the first quarter, Fitch says, noting that earnings call commentary from some of the banks indicates that deal backlogs are declining and that the M&A cycle is in its late stages.
JP Morgan leads in FICC trading with a market share of more than 30%, Fitch says, and leads the Wall Street firms in capital markets revenues, with Goldman coming second. Overall, it reports, market shares for the five banks “remain broadly stable.”