JPMorgan, BofA Trading Revenues Tumble 15%; Blame Lack Of Volatility, "Excitement"
Stop us when you've heard this before... and you've heard it exactly two times in the last two quarter: both Bank of America and JPMorgan warning their revenue will be down double digits year over year because volatility is so low, and traders are so paralyzed, there is much less money to be made trading either flow or prop, or simply from collecting commissions.
Well, today marks the third time in the last three quarters when both JPMorgan and Bank of America both said - again - that there hasn’t been a rebound in the relentless slump in trading revenue.
Speaking at an investor conference in New York on Tuesday, JPMorgan CFO Marianne Lake said that revenue from trading has dropped 15% so far this quarter compared with the same period a year ago, while Bank of America CEO Brian Moynihan gave the same decline for his firm. Both said the business faces a difficult comparison to last year, when activity spiked after Donald Trump’s surprising presidential election win.
Commenting on the ongoing deterioration in bank revenues, Lake said that “there hasn’t been that many catalysts, it hasn’t been that exciting,” Lake said. “Volatility sill remains pretty low across the spectrum; it’s a very competitive environment.”
Lake spoke alongside Goldman Sachs CFO Marty Chavez and BofA COO Tom Montag, who said at a conference last month that the languor that has plagued their trading businesses in the last two quarters has persisted into the fourth period. According to Bloomberg, Chavez said his bank’s commodities unit is on pace for its worst year in the firm’s history as a public company.
With traditional revenue streams clogged, banks are forced to come up with alternatives. Sure enough, JPM claimed that the lack of volatility hasn’t been a problem in the bank's corporate and investment bank, where fees should rise in the “high single digits” as activity levels have been healthy, Lake said. And, if passed, the proposed U.S. tax changes should continue to help that business, Lake said.
Clearly markets aren't too worried, with JPM stock soaring to all time highs, and BofA trading at pre-financial crisis levels.