Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

If investors were hoping that the sharp rebound in risky assets since the middle of February was going to help turn the tide for investment banks, they should think again.

Citigroup's Chief Financial Officer John Gerspach threw cold water on that notion Tuesday by saying fixed-income and equity markets revenue would be down about 15 percent in the first quarter compared with figures in the period a year earlier, as Dakin Campbell reported. Investment banking revenue as a whole will be down about 25 percent as clients stay largely on the sidelines when it comes to issuing debt and equity or engaging in mergers and acquisitions, Gerspach said.

On the Mend
The S&P 500 has been showing signs of a recovery to its level at the start of the year.
Source: Bloomberg

Of course, the notion was already a bit soggy. JPMorgan said about two weeks ago that revenue from sales and trading had tumbled about 20 percent and that weakness in debt and equity underwriting might contribute to a 25 percent decline in investment banking fee revenue. That heads-up came when the S&P 500 was only about halfway through a 9 percent rebound that (almost) brought it back to where it started the year and oil was halfway through a rebound of as much as 45 percent that did bring it back to where it started the year, however briefly.

It's clear that while markets are capable of at least temporarily bouncing back from violent sell-offs in machine-like speed, capital markets activity is not so quick to recover. The question is: Are these deals gone forever or just postponed? Gerspach seems to have his fingers crossed. As he said at the RBC Capital Markets conference on Tuesday, according to a transcript:

I would say that there's probably some hope that we would recapture some of that in the second -- in the last three quarters of the year. When you take a look at the pipeline that we have in M&A, I think we'll get some of that back, but it's been a tough first quarter.

The market volatility has obviously had another big impact on the profit outlook for banks by reducing the prospects for more interest-rate increases from the Federal Reserve.

It's all added up to sharply lower estimates for earnings at Citigroup:

Citigroup Estimates
Average earnings-per-share projection has fallen to about $1.30 for each of the first two quarters of 2016.
Source: Bloomberg data

And JPMorgan:

JPMorgan Chase Estimates
First-quarter EPS projections have fallen more swiftly than second-quarter estimates.
Source: Bloomberg data

And Goldman Sachs:

Goldman Estimates
The average first-quarter EPS projection is down more than 90 cents in six months.
Source: Bloomberg data

And Morgan Stanley:

Morgan Stanley Estimates
EPS for the first two quarters of the year have both fallen to less than 75 cents.
Source: Bloomberg data

As Gerspach said, Citigroup went into 2016 expecting two rate increases for the year and now expects one. "But I haven't given up complete hope yet that we'll end up with the two that we've actually got baked into our expectations." 

There's that word "hope" again. Implicit in that hope is that Tuesday's plunge in oil and equities was the anomaly -- not the sharp rebound that preceded it. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at

To contact the editor responsible for this story:
Daniel Niemi at