Investment Bank Revenue May Decline, JPMorgan Analysts Say

Updated on
  • Goldman Sachs among top picks thanks to capital positions
  • Banks’ FICC, equities unit revenue to also fall in 4th quarter

Global investment banking revenues may decline 9 percent this quarter on low volatility and a selloff of high-yield debt, analysts at JPMorgan Chase & Co. said.

The credit selloff is so far “limited to specific names" such as Altice NV, analysts led by Kian Abouhossein said in a note to clients. “We would be concerned if there were a more sustained credit selloff."

Revenues from trading fixed income, currencies and commodities are expected to decline 13 percent in the three months through December versus the same period last year, while banks’ equities businesses may drop 10 percent, the analysts said. Banks with more exposure to equities will be preferred, they said. Overall, investment banking revenues are expected to rise three percent next year, they said.

Long-term, U.S. banks including Goldman Sachs Group Inc. and Morgan Stanley are top global picks due to their better capital positions, while Credit Suisse Group AG is the top choice in Europe in investment banking as the market has not yet factored in the bank’s anticipated cost savings, the analysts wrote.

Executives at two of Wall Street’s biggest trading firms, last week shot down any optimism that the languor in that business is receding. Bank of America Corp. Chief Operating Officer Tom Montag said the trading environment remains muted while Goldman Sachs Chief Financial Officer Marty Chavez said the quarter will also suffer from a difficult comparison to last year, when the results of the U.S. presidential election spurred client activity.

— With assistance by Brandon Kochkodin

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