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Foreign Exchange

Bank FX revenues fall 9.4% in first half, says Coalition

The world’s leading investment banks saw less revenue flow through their books from FX trading in the first six months of this year, amid tightening spreads and reduced market volatility, according to consultancy firm Coalition.

G10 bank FX revenues were estimated at $4.16 billion during the first half of 2012, a 9.4% fall from the same period last year when revenues were seen at $4.59 billion. In FX, volumes improved in the first half of 2012 versus 2011, but the tightening of trading spreads driven by efficiency improvements in electronic trading platforms hurt performance in the market, says the consultancy.

“Flat year-over-year [FX] performance in the first quarter of 2012 was followed by a weaker second quarter as currency volatility declined,” according to the firm.

Fixed income revenues by product for H1 2012 

 
 Source: Coalition

The stabilizing effects of European Central Bank intervention in capital markets at the end of 2011 saw G10 rates businesses benefit from increased activity in the first half 2012, but revenue flow in other fixed-income businesses, such as credit, was generally hit by reduced client demand, says Coalition.

Indeed, double-digit revenue growth from rates businesses offset declines across other areas of fixed income, with the exception of emerging markets, which was little changed from the first half 2011, according to Coalition.

Across fixed income, revenues rose 2% to $52 billion in the first half of 2012. For the full year, Coalition forecasts fixed-income revenues of $84 billion, a rise of 12% on 2011.

Fixed income remains the biggest source of revenue for the big banks, with Coalition predicting it will make up 57% of the total in 2012.

 Coalition index revenues by business for H1 2012

 

 Source: Coalition



Investment banks have slowed staffing cuts in fixed income since the first quarter of this year, with institutions looking to lower headcount in other areas during the course of the rest of this year. “Overall, investment bank productivity appears set to increase, driven by improved revenues from fixed income, and headcount levels being at a five-year low,” says Coalition.

The firm says greater headcount reduction is more likely in Asia Pacific, as EMEA and Americas had the most aggressive cuts in 2011.

Coalition index -- Producer headcount full-time employees (000) 

 

 Source: Coalition



Coalition tracks the performance of the 10 largest investment banks globally, which are: Bank of America Merrill Lynch; Barclays Capital; Citi; Credit Suisse; Deutsche Bank; Goldman Sachs; JPMorgan; Morgan Stanley; RBS; and UBS.

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