Bored traders on Tinder a symptom of Wall Street revenue from trading dip
ONE BOND trader says he’s been slipping out early to watch his kids play sports. A fund manager says his office just staged a golf retreat. A trading supervisor at another bank confides he’s swiping through a lot of profiles on Tinder, the dating app.
Welcome back, Wall Street, to the doldrums.
After four straight quarters of rising income from trading, the biggest US investment banks spent the past few months in a renewed slump. Shareholders will soon see how dull it’s been. Analysts estimate the five largest firms will say their combined revenue from trading dropped 11 per cent from a year earlier to US$ 18.4 billion – the smallest haul for a second quarter since 2012. The banks start posting results July 14.
Behind the scenes, traders grouse about a lack of marketmoving news. Congressional gridlock is eroding optimism that President Donald Trump can enact a sweeping, pro-business agenda. Other geopolitical frictions have yet to jolt markets. The Federal Reserve is sticking to its interest-rate path.
Among the hardest hit are fixed-income traders. Combined, the five firms are likely to say revenue from that business fell 16 per cent to US$ 11.2 billion, according to estimates gathered from nine analysts.
At Goldman Sachs, it probably tumbled 23 per cent to about US$ 1.5 billion, the estimates show. At JPMorgan Chase, it likely fell 17 per cent to US$ 3.3 billion.
In equities trading, analysts estimate total revenue slipped two per cent to US$ 7.2 billion. Stock-trading leader Morgan Stanley may post the sharpest decline, about six per cent.
Spokesmen for the five banks declined to comment.
Trading results are closely watched. The business generates about 25 per cent of total revenue at the five banks and tends to be their most volatile major business. And to be sure, analysts – often drawing on banks’ own commentary – usually underestimate results. Citigroup’s net income, for example, has beaten their average estimate for 13 straight quarters. This time, the depth of a trading dip may be curtailed by an expected boost in lending fees.
Bank leaders began tamping down expectations at investor conferences six weeks ago. JPMorgan Chief Financial Officer Marianne Lake delivered the first warning, telling investors trading revenue was down roughly 15 per cent in the quarter’s initial two months, hurt most by fixedincome trading. Equities held up better, she said, especially in derivatives and among units that cater to hedge funds.
That same day, Bank of America Chief Executive Officer Brian Moynihan added to investors’ dismay by revealing his firm’s trading decline would probably be between 10 per cent and 12 per cent. Both executives blamed diminished client activity and low volatility. Citigroup CEO Michael Corbat soon echoed the prognosis, saying his firm is “right in line.”
Jefferies Group, which starts its fiscal year a month ahead of larger investment banks, reported a 6.9 per cent decline in trading in the quarter ending May 31. Muted activity proved tough for desks handling corporate securities, leveraged credit and emerging markets. Mortgage and rates traders fared better. —WP-Bloomberg