- REUTERS/Suhaib Salem
It was a painful three months for Wall Street banks’ fixed income, currencies and commodities – or FICC – divisions. The big banks’ FICC divisions, which for so long have powered earnings, have suffered as the debt traders began worrying about an economic slowdown. At Morgan Stanley and Goldman Sachs, the fixed income businesses account for about one-third of investment bank revenue. At JPMorgan, FICC is closer to 40%.
Morgan Stanley reported a punchy $400 million decline in fixed income and commodities sales and trading revenue – a nearly 42% drop from a year ago. Morgan Stanley attributed the drop to “difficult market conditions for our credit and securitized products businesses.”
That more than offset better results from equities sales and trading and investment banking.
There was a similar story at Goldman Sachs, which last week reported a 27% fall in fixed income, currencies and commodities revenue, excluding accounting adjustments – a drop that contributed to a big earnings miss at the US investment bank.
Citigroup posted a 16% decline, reflecting “lower client activity levels and a less favorable trading environment”, while JPMorgan and Bank of America Merrill Lynch both posted a 11% decline in FICC revenue.
It looks like the pain could continue. On a conference call following JPMorgan’s earnings release, chief financial officer Marianne Lake made a dark prediction for the fourth quarter.
“If markets remain at these levels, Q4 revenue will also be lower” than guidance, Lake said.