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OPINION

Macaskill on markets: Trading revenues deserve an upgrade

Trading divisions at banks aren’t just offsetting slumping deal fees, they are also becoming more efficient. They could drive an upgrade in equity valuations.

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Photo: Pixabay

Earlier this year, Euromoney highlighted the likely boost to commodity revenues from Russia’s invasion of Ukraine and, later, the extent to which markets income could offset a collapse in fees from deal launches for banks.

Second-quarter earnings results for Wall Street banks confirmed these predictions. Strong growth in trading revenues compared with the same quarter in 2021 helped to balance the trend of fees from deals that were either down – as with debt underwriting – or virtually disappeared, as with key equity capital markets such as IPO launches.

Goldman Sachs and Citigroup led the trading pack in the quarter, with markets revenues that were up by 32% and 25% respectively, compared with the second quarter of 2021.

Most Wall Street firms delivered reasonable equity trading growth in the second quarter … while related new-share issuance deal flow collapsed

Fixed income dealing, especially in rates, currencies and commodities, drove this outperformance.

Goldman’s second-quarter fixed income revenue rose by 55% compared with the previous year, to $3.61


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