Banks on course for blockbuster 2024 trading revenues

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Banks continue to generate their highest annual trading revenue since 2010, as equity derivatives and credit deals help power the business.

The industry is expected to bring in about $225 billion in trading revenue in 2024, according to estimates of the performance of more than 250 banks by industry research group Coalition Greenwich.

That figure would surpass the blockbuster $224 billion earned in 2022 when financial markets were rocked by Russia’s full-scale aggression in Ukraine, and marks the best year for the bank’s traders since 2010 when they earned $226 billion.

restlessness US election ahead And so-called yen carry trades around the malaise helped boost trading revenue higher than Wall Street analysts and investors expected.

But banks also made large revenues from securitization trading, spurred by The highest level of issuance since 2007When a rebound in equity capital market activity supports equity derivatives trading.

“Market revenue for banks as a whole has been stronger than what we had initially forecast [2024]said Molly Devine of Coalition Greenwich.

“Following the high-water mark of 2022. . . End in a similar place [to that year] Considered a positive result for banks and better than expected.”

The latest figures show how Wall Street businesses have rebounded after a five-year decline between 2014 and 2019, even as they face growing competition from specialist electronic trading firms such as Citadel Securities and Jane Street.

Five are the largest Investment bank Trading revenue is on track to generate $112 billion by 2024, surpassing 2022, according to Bloomberg’s consolidated estimates.

Analysts forecast full-year revenue for fixed income and equity trading at JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup to grow 6.1 percent through 2023.

Of the five big US investment banks, only BofA is expected to earn comfortably more from trading in 2024 than in 2022 and 2023 — though its overall total is the lowest. Jim Deemer, who runs the business for BofA, is seen as a leading candidate to potentially succeed longtime CEO Brian Moynihan.

The end of the last decade was characterized by low market volatility, rock-bottom interest rates, and high regulatory and technology costs. Banks benefit when prices bounce around instead of moving steadily to one side.

Trading activity was boosted by the Covid-19 pandemic, which marked a return to extreme volatility in markets and geopolitical events such as Ukraine, as well as rising interest rates.

Big banks have also benefited as rivals withdraw from the trading business — including Deutsche Bank Exit from Equity Trading And the demise of Credit Suisse – which allowed those still standing to capture more business.

“Top four or five [banks] There is a larger market share today than 10 years ago,” said Gerard Cassidy, banking analyst at RBC.

Banks have focused on financing prime brokerage operations in equity and lending to private investment firms in fixed-income, valued by shareholders as more predictable businesses.

Unlike 2022, when trading revenue was driven by commodity and macro trading movements, equity derivatives, credit and securitization were the hotspots in 2024.

Investors generally refrain from attributing high valuation multiples to trading activity because of its lack of predictability.

“In 2019 we were in discussions with some clients to shrink or exit low returning businesses like commodities and cash equities. The dialogue has changed,” said Coalition Devine.

“Our clients do not expect revenues to drop to pre-Covid market levels any time soon.”