NEW YORK - The boost in trading revenue that JPMorgan and Citigroup reported on Tuesday throws down a challenge for other U.S. banks publishing earnings this week. But the rivalry may be more appearance than reality. Among Wall Street’s biggest firms, the pecking order has barely changed in years.
Trading in securities markets is volatile. JPMorgan’s 55% increase in trading income for the fourth quarter of 2019 was partly possible because such revenue had decreased 6% in the same period a year earlier. Performance also varies by company – a year ago, Citi’s trading revenue fell by 14%, while the haul at Goldman Sachs grew slightly. In the latest three months, Citi notched up 31% growth.
Stand back a bit, and things don’t vary so much. The combined quarterly trading revenue for JPMorgan, Citi, Goldman, Bank of America and Morgan Stanley has barely changed from the $20 billion or so they were making in the middle of 2010, according to data from filings. For the industry overall, revenue has shrunk dramatically, especially for European lenders like Deutsche Bank, but the top five have held their ground.
Relative market shares have also maintained a gentlemanly order, with the exception of two notable shifts. Goldman started 2010 as the top fixed-income house, and now it’s usually fourth. Morgan Stanley, meanwhile, has become top dog in equities. But James Gorman’s firm mostly remains stubbornly last of the five-strong pack in fixed income, whereas Jamie Dimon’s JPMorgan has persistently ruled that roost for the best part of a decade, occasionally trading places with Citi.
The status quo may continue for years to come. The big banks are now focused on technology rather than winning market share. As machines take over from humans in some areas of trading, the old rivalries become less relevant.
There’s one exception: Goldman Sachs boss David Solomon has set out to win more business from corporate clients, and is moving into so-called transaction banking – looking after companies’ daily cash and trading needs – to speed that
- JPMorgan on Jan. 14 reported $28.3 billion of revenue for the final three months of 2019, a 9% increase on the same period a year earlier.
- Revenue from trading securities increased 56% year-on-year to $5 billion, including an 86% year-on-year increase in fixed income trading. Chief Financial Officer Jennifer Piepszak said in December that markets-related revenue would be “meaningfully up.”
- Diluted earnings per share of $2.57, compared with analyst estimates of $2.35, were 30% higher than the same quarter in 2018.
- Citigroup reported revenue of $18.4 billion for the quarter, a 7% increase on the previous year. Diluted earnings per share of $2.15 compared with analyst estimates of $1.84, and represented 31% annual growth.
- Trading revenue increased by roughly one-third to $3.4 billion, driven by a 49% increase in fixed income revenue to $2.9 billion. Equity trading revenue fell by 23%, year-on-year.
- Bank of America and Goldman Sachs are due to report earnings on Jan. 15.
(Editing by Richard Beales and Amanda Gomez)
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