Bond trading weakens for US banks as interest rate volatility affects investors
BAC•Morgan Stanley, JPMorgan and Bank of America reported year-on-year declines in fixed-income trading revenue, while Citigroup’s rose 4%. Bank of America’s unrealized bond portfolio losses widened to $109 billion in September from $85 billion in June.
1. Fixed-income trading falls
A steep bond-market selloff and volatile interest rates weighed on Wall Street banks’ fixed-income trading in the third quarter. FICC revenue fell 7% year on year at Morgan Stanley, 4% at JPMorgan and 17% at Bank of America; Goldman Sachs was flat, while Citigroup rose 4%, with growth driven mainly by foreign exchange and spread products.
2. Bond losses widen
Bank of America reported $109 billion in unrealized losses on mortgage-backed securities and U.S. Treasury and government-agency bonds for the quarter ended September, up from $85 billion at the end of June. Most of the securities were held to maturity, which the bank does not intend to sell.
3. Equities trading grows
Equities trading revenues rose 72% at Goldman Sachs, 41% at Morgan Stanley and 49% at JPMorgan. Bank of America and Citigroup posted growth of 11% and 14%, respectively. Oppenheimer analyst Chris Kotowski warned that equity trading revenue could be volatile, writing that there was an “easy come, easy go” risk.
