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Capital Markets

Fixed income: Trading boosts bank revenues

Trading is bringing in the money for Wall Street, but is it artificial?; Fed might not unwind programmes next year

residential mortgages purchased by the Fed

A glance at the third-quarter reports from Wall Street indicates that trading revenues are still the key driver of earnings. Goldman Sachs reported almost $6 billion in fixed-income, currencies and commodities net revenues for the quarter, JPMorgan reported just over $5 billion and Citi and Bank of America around $4 billion each. In equities trading, Credit Suisse and Goldman Sachs were the best performers, each with about $1.84 billion in revenues. Analysis of second-quarter results by the Office of the Comptroller of the Currency indicates that the quarter had the sixth-highest level of trading ever recorded. From the earnings reported so far, the third quarter looks to be on a par.

Including principal trading, trading revenues at Goldman Sachs in the third quarter accounted for 75% of total revenues. JPMorgan’s trading revenues accounted for 79% of its investment banking revenues in the same quarter.

Fixed income, and particularly mortgage and credit product trading, has been driving revenues, say company earnings reports. Volumes for TBA mortgages (those issued by Fannie Mae, Freddie Mac and Ginnie Mae) have been high.

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