Markets are a little too calm, at least as far as Wall Street is concerned.
Bankers had already warned in recent weeks that revenue from bond and stock trading would be lower than the strong first quarter and compare less favorably to the second quarter last year, when markets were jolted by the United Kingdom’s vote to leave the European Union. There wasn’t any such excitement this year to stoke the volatility needed to boost trading.
“This quarter, conversely, can be characterized by a lack of idiosyncratic events,” said Marianne Lake, JPMorgan’s chief financial officer, on a conference call with analysts Friday morning, according to a transcript by FactSet. The bank’s revenue from fixed-income trading fell 19 percent from last year, and 24 percent from the first quarter. For the year through June, fixed-income trading revenue is down 2 percent.
Stock trading wasn’t robust, either. JPMorgan said revenue in that business was down 1 percent from last year’s second quarter and this year’s first quarter. It’s up about 1 percent for the year. At Citigroup, equity trading fell 11 percent, reflecting “episodic activity in the prior year period, as well as low volatility in the current quarter.”
The expectations aren’t high for other big banks due to report later this month, including Goldman Sachs, Morgan Stanley and Bank of America, whose CEO said last month that trading revenue was likely to be lower than last year.
Trading once propelled Wall Street’s big banks to big profits, but the business has taken a hit from increased regulation and market forces driving profit lower.