Our rummage through the quarterly earnings reports of the US banks shows, with one exception, less money made out of FX in this quarter than the last. This isn’t a surprise, the European sovereign debt crisis (whatever happened to that?) of the second quarter was a godsend for volatility and volumes; the third quarter, while it ended with a flourish, was more noted for the depth of the summer slumber.
Goldman Sachs again reported the highest number – not by very much – and its figure of $3.766 billion is for fixed income, currencies and commodities, which makes it difficult to compare with those banks where FX is part of fixed income alone.
Anyway, the figure is a decline from $4.396 billion in the second quarter and a bigger drop from the $5.991 billion reported for the halcyon days of Q3 ’09. Goldman says the result reflects “a challenging environment during the quarter, as activity levels were significantly lower compared with the third quarter of 2009. The decrease in net revenues compared with the third quarter of 2009 reflected lower results in each of FICC’s major businesses, including significantly lower net revenues in interest rate products and credit products.” It is possible to infer that, while FX revenue was lower, it wasn’t “significantly lower”.
Close behind Goldman were Bank of America Merrill Lynch and Citi. Bank of America also reports FX within FICC but was seeing a different market entirely: revenues were up at $3.527 billion from the disappointing $2.316 billion in Q2 and only 15% down on Q3 ’09’s $4.004 billion. Strangely the bank found the quieter markets were better for revenues: “FICC revenue increased $1.2billion [compared to Q2] due to spread tightening, increased customer activity and eased concerns from the European sovereign debt crisis.”
Citi’s fixed income figure of $3.501 billion shows little slippage from $3.713 billion in the second quarter and $4.024 billion for Q3 ’09. But it might have been a mixed bag in FX: “Rates and currencies revenues declined, as growth in Local markets, which includes rates and foreign exchange trading primarily in emerging markets, was more than offset by lower G10 rates trading revenues.”
JPMorgan Chase brought up the rear of the big four, though its fixed income number was also in excess of $3 billion for the quarter. Revenue was $3.123 billion, compared with $3.563 billion in the second quarter and $5.011 billion in Q3 ’09. There’s not a lot of illumination from their text: “Fixed income markets revenue down 38% YoY, reflecting lower results in credit and rates markets.”
There was some excitement last quarter over Morgan Stanley’s numbers. We even suggested that its investment in technology was paying off. But revenues appear to have fallen sharply to $846 million from the second quarter’s promising $2.3 billion and $2 billion in Q3 ’09. There is some confusion in the numbers – Morgan Stanley keeps going on about DVA – but overall it looks like the bank’s clients took extended summer vacations: “Fixed income sales and trading net revenues were $846 million compared with net revenues of $2.0 billion in last year’s third quarter. DVA resulted in negative revenue of $464 million in the current quarter compared with negative revenue of $546 million a year ago. The decrease in net revenues from last year’s strong third quarter reflected lower trading results across our businesses.”
Outside the top 10, State Street and Bank of New York Mellon also reported. Helpfully, both banks give numbers for FX, though revenues were reported down as both suffered from the lower volatility.
At State Street: “Trading services revenue, which includes foreign exchange trading revenue and brokerage and other fees, was $228 million for the third quarter of 2010, a decrease of 15% from $269 million in the third quarter of 2009. Foreign exchange revenue decreased 30% primarily due to lower volatility and volumes.”
At Bank of New York: “FX and other trading revenue totalled $146 million compared with $246 million in the prior year period and $220 million in the second quarter of 2010. In the third quarter of 2010, foreign exchange revenue totalled $160 million, a decrease of 35% sequentially, driven primarily by seasonality and lower volatility.”
