In Ominous Sign For Banks, Equity Trading Revenues Continue To Drop

Thursday, March 30, 2017
By Paul Martin

by Tyler Durden
Mar 30, 2017

It’s not just the HFT industry that has cannibalized itself so much, while spooking regular traders out of the markets, there is hardly any revenue growth left (as the WSJ showed last week). After suffering a substantial drop in bank equity trading revenues over the past several years, there was hope that finally this key P&L items of sales and trading would post a modest pick up. Alas, whether due to lack of volatility, declining interest in equities, or simply because many no longer have faith in the market, this is not happening despite the S&P recently rising to an all time high of 2,400.

In 2016, the Office of the Comptroller of the Currency reported that equity trading revenues at U.S. banks fell 13% in 2016 from the previous year. The slide contrasts with a 9% rise in overall trading driven by interest-rate and currency products. Globally, the biggest dozen banks suffered a 13% drop in equity trading in 2016, the first meaningful annual decline since 2012, according to research firm Coalition.

And while there were some modest signs of a pick up in late 2016, this appears to have been a false dawn. According to the WSJ, as the first quarter wraps up this week bankers say the weakness experienced last year is continuing. That is prompting questions about whether banks should be preparing for a longer-lasting decline in the business, rather than a cyclical dip.

“Client volumes are down…that’s an industry issue,” said Morgan Stanley President Colm Kelleher at a conference in late March. When comparing Morgan’s first quarter of this year with the last quarter of 2016, he concluded that the equities business was “not doing as well.”

The Rest…HERE

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