Investment bank revenues improving over first quarter
BUSINESS has been better than expected for investment banks so far this year, according to research by JP Morgan analysts, offering a glimmer of hope for the troubled industry.
But the analysts, led by Kian Abouhossein, are still expecting the first quarter of this year to show a marked drop in revenues compared to the start of 2011.
The analysts write: “We witnessed material improvement in investment bank overall revenues from the first two weeks of January into February, leading us to upgrade our year-on-year FICC (fixed income, commodities and currencies) revenue estimate for the first quarter of 2012 from minus 26 per cent to now minus 13 per cent year on year.”
They add that if the trend continues, they could see revenues declining by less – potentially by five per cent – but that it is not yet strong enough to merit a full-year upgrade.
The assessment reflects a greater sense of optimism since the New Year, in large part due to the European Central Bank’s decision to inject a flood of long-term funding into the continent’s banking system, which has seen bank wholesale markets unfreeze.
The JP Morgan research note shows that fixed income activity and the business generated from it have jumped so far this year. In particular, global government debt issuance has shot up from a quarterly average of $70bn (£45bn) at the end of 2011 to $132bn this year so far, the data shows.
Equity volumes are also sharply higher this year. The three-month average volume for the LSE has gone up from $2.2bn in December to $3bn.