What they said about CIB in 2018


Mark Baker
Published on:

The biggest dozen global investment banks have now reported their results: here's what their execs said about each of your businesses

FY18 vs FY17 % change heatmap

heatmap FY18 680px

1 CIB is ICS+IB at GS, IS at MS, GB+GM at BAML, CIB at JPM, ICG at Citi, CIB at DB, CIB at BARC, IB at UBS, GBM at HSBC, GMIS+F&A at SG, CIB-related at CS, CIB at BNPP
2 BARC, BNPP, SG and HSBC do not break out DCM/ECM/Adv revenues
Source: Euromoney, bank results announcements

What they said about…ADVISORY
(Percentage change figures are 4Q18 vs 4Q17, then FY18 vs FY17)

Bank of America Merrill Lynch (-7%, -26%): Slightly up in 4Q, but lower for the year.

Barclays (n/a): A record year for the fourth year in a row, but was more than offset by the falling in underwriting fees.

Citi (+47%, +16%): Strong 4Q growth but offset by a decline in underwriting. Gained share.

Credit Suisse (+35%, +24%): A higher 4Q was driven by higher client activity in the Americas.

Deutsche Bank (+17%, -3%): 4Q was the best quarter for three years, but more than offset by the decline in DCM.

Goldman Sachs (+56%, +10%): Up on industry-wide and increases in completed M&A.

JPMorgan (+38%, +17%): A record year for advisory fees (and a record for total IB fees). Good momentum in 4Q on several large completed deals.

Morgan Stanley (+41%, +17%): Up strongly on more completed M&A in all regions. 4Q was the best quarterly result in 10 years, although offset by declines in underwriting fees. Full year result was second highest ever.

UBS (-21%, +10%): 4Q revenues down even though global fee pool increased, as revenues fell in private transactions.

In a crowded field, the best "it's not like the bad old days" comment was from James Gorman:

"I certainly don't see it as the Morgan Stanley of old, the sort of episodic volatile shifts, over-dependence on prop positions, big marks, misplaced trades, major integrations going on at the same time, selling businesses, writing stuff off – we're not remotely close to that."

What they said about…ECM
(Percentage change figures are 4Q18 vs 4Q17, then FY18 vs FY17)

Credit Suisse (-70%, -8%): Lower in 4Q on lower follow-on offerings and a loss on a block trade, and also lower IPO issuance amid market volatility. Full-year down additionally on lower rights issue activity. Better result in IPOs and equity derivatives.

Goldman Sachs (-32%, +32%): Full year significantly higher on strong IPO result. 4Q lower particularly on decline in secondary offerings.

JPMorgan (-4%, +15%): Down in 4Q but outperforming competitors. Particular strength in IPOs, tech and healthcare.

Morgan Stanley (-22%, +16%): Down in 4Q on lower IPO issuance.

UBS (-48%, -28%): 4Q down on lower public offerings as fee pool dropped, but also a decline in private deal revenues.

What they said about…DCM
(Percentage change figures are 4Q18 vs 4Q17, then FY18 vs FY17)

BNP Paribas (n/a): Good in primary bonds and in structured, and still ranked top for euro bond issues. Third in Europe high yield and third in green bonds.

Credit Suisse (-29%, -11%): 4Q lower as the industry fell, but particularly in leveraged finance. And 4Q17 had been better with very low volatility, so 4Q18 looked even worse. On a full year basis lower leveraged finance activity hurt again, but things were better in derivatives.

Deutsche Bank (-47%, -19%): Lower because of a weaker result in traditional areas of strength like leveraged finance and high yield, but 2019 started well. Originate to distribute model means relatively low exposure. Hiring in DCM.

Goldman Sachs (-42%, -8%): Full year and 4Q suffered from decline in leveraged finance. But now number two in high yield and number four in investment grade on a multiyear commitment to build in DCM.

JPMorgan (-19%, -12%): Down after a strong prior year, but good in high yield and leveraged loans. Not too concerned with industry hung bridges, because although there was a big correction with spreads widening, leveraged finance commitments are still materially down from pre-crisis and credit fundamentals look good. About half of the $1.7 trillion of outstanding leveraged loan exposure is term A, and as much as 70% of the term B is with non-banks. The banking system leveraged lending bridge book in 2007 was over $400 billion, now it's more like $80 billion. But JPMorgan still refused a lot of deals in 4Q and made sure it was well protected with flex.

Morgan Stanley (-28%, -3%): The slowest quarter for the industry since 2011, with high yield the lowest since 2009. Volatility really shut it down, but at the time of the results announcement high yield spreads had already moved back in by 100bp. Leveraged loans were back to where they were before the year-end volatility. Signs of LBOs reopening.

UBS (-16%, -3%): Lower investment grade revenues in 4Q on an industry fee pool drop of 22%. But leveraged finance was unchanged against a fee pool decrease of 32%.

The best zinger, unsurprisingly, was from Jamie Dimon

"I have pointed out over and over that it takes 12 years to get the permits to build a bridge, and it took eight years to put a man on the moon"

What they said about…FICC
(Percentage change figures are 4Q18 vs 4Q17, then FY18 vs FY17)

Bank of America Merrill Lynch (-15%, -8%): Weakness in credit and mortgages in 4Q, but a solid start to 1Q19 and a recovery in client activity.

Barclays (-6%, -0.4%): Full-year significant share gains despite the challenging environment. 4Q was dragged down by credit even though macro was up.

BNP Paribas (-15%, -21%): Lacklustre context for client business in rates and credit in Europe as a result of monetary policy. FX down, especially in emerging markets. Digital transformation has led to good development on multi dealer platforms – ranked number one for interest rate swaps in euros on those. General trend is more worrying structurally than the weaker climate in equity derivatives, but at some point rates will go up even though electronification will continue to apply pressure to margins.

Citi (-21%, -6%): 4Q weakness in FICC more than offset growth in securities services and equities. Volatility and widening spreads in December were especially challenging. In particular the bank did not see the expected level of transactions in G10 rates. For the full year, G10 FX and local market rates and currencies were roughly flat.

Credit Suisse (-17%, -8%): In 4Q the credit franchise was lower on less favourable market conditions, and in particular lower leveraged finance trading. Macro was down on lower rates and a rationalization of the business. Emerging markets was down slightly on lower financing revenues but partly offset by increased structured credit business in Latin America and higher trading in brazil. Securitized products were up on a gain from the sale of an investment and good momentum in asset finance. Asia Pacific was lower, driven by development market rates, as well as FX and credit.

Deutsche Bank (-23%, -17%): 4Q good FX trading strength on higher volatility and solid flow was more than offset by declines in rates and credit. Bank has been lowering RWAs allocated to the US rates franchise. Hiring in FX. Flow credit and securitized trading hit by mark to market.

Goldman Sachs (-18%, +11%): The firm is reallocating capital away from FICC and cutting expenses, and expects automation to evolve in a similar way to how it has done in equities. It wants to leverage investment banking relationships to better serve corporates, and is already seeing this happen in commodities and FX. On a full year basis, significantly higher in commodities and currencies, while interest rate products and mortgages slightly lower. Credit unchanged. An improved institutional client base wallet share according to Coalition data, but with minimum top line benefit because of market conditions. Electronic business up more than 40%. In 4Q lower in credit and rates, but commodities, currencies and mortgages unchanged.

HSBC (-18%, -8%): Lower in rates and credit, partly offset by a higher result in FX on increased volatility in emerging markets.

JPMorgan (-16%, -1%): Declines in the quarter in credit, rates and commodities, but offset partly by emerging market strength.

Morgan Stanley (-30%, +2%): The full year was lower in credit and rates on poor conditions amid a big widening of credit spreads and volatility in rates. But commodities was up, although it is a smaller part of the firm's footprint than at peers. Weakness in macro and credit in 4Q, on increased economic uncertainty on growth and rate outlooks, as well as rapid movements in spreads and asset prices. A breakdown in historic relationships led to losses as we supported clients. The FICC wallet is down 10% since 2016 when the firm restructured the franchise, but it has gained market share and posted about $5 billion of revenues each year. It is credibly sized for the opportunity that exists now. $500 million is "hardly a good quarter", but the firm does not expect that to be standard operating procedure.

Société Générale (-29%, -17%): Resilient commercial activity, but rates and credit hit by the unfavourable environment. Commodities was good, especially in energy and carbon.

UBS (+14%, +16%): 4Q FX up on higher volatility and activity and where we are overweight versus peers, but credit and rates down, with mostly weaker trading in credit flow. Lower in credit. Peers get more upside than UBS when spreads tighten but when things get worse the firm's capital-light model should help it perform better, which is what it saw.

What they said about…EQUITIES
(Percentage change figures are 4Q18 vs 4Q17, then FY18 vs FY17)

Bank of America Merrill Lynch (+11%, +18%): Benefited from higher market volatility which increase client activity in derivatives and need for client financing.

Barclays (+4%, +25%): One of the highest growing franchises. On a full year basis strong in derivatives and client balances were up. Electronic revenues were up.

BNP Paribas (-70%, -6%): Particularly challenging for equity and prime services at the end of the year, but VaR still low. Some extreme market movements at the end of year hit inventory valuations and there was a loss on index derivative hedging in the US. More client business in equity derivatives and prime brokerage. 4Q lower in structured products. Firm's franchise very focused on derivatives, with almost no cash, which means less of a buffer in difficult conditions. Low client demand for structured product in 4Q but should return to more normal conditions judging by start to first quarter.

Citi (+18%, +19%): 4Q was up but helped by a prior-year loss. On an underlying basis slightly down. Strong derivatives result was offset by tough trading conditions and lower client financing balances. Solid progress on a full year basis.

Credit Suisse (-14%, -4%): 4Q lower in cash and prime, and hurt by a loss on a block trade. Prime lower in line with market indices, but client financing higher. Much higher equity derivatives revenues. In Asia lower in derivatives and cash on lower client activity, as well as a one-off gain last year on the exercise of a call on a structured note liability.

Deutsche Bank (-2%, -13%): Has been lowering RWAs allocated to business. Mostly flat in 4Q as derivatives up but lower prime and cash.

Goldman Sachs (+17%, +15%): Full year was significantly higher in cash products and derivatives. Commissions and fees were up on higher market volumes. Securities services was slightly higher. Firm is gaining share in low touch, while Mifid II has driven share to US banks. 4Q was higher than a challenging prior year period. Cash was higher but derivatives unchanged. Securities services was slightly lower.

JPMorgan (+15%, +21%): A record year!

Morgan Stanley (+0.5%, +12%): Overall the strongest result in over a decade, up 12% to $9bn. Still ranked number one. Severe intraday and intraweek movements hurt cash and derivatives in 4Q. Prime strong, balances down but strong transactional activity at the start of the quarter. Saw dramatic deleveraging in 4Q, but a couple of points of gross balances had come back by the time of the results announcement, although still not at October levels.

Société Générale (-16%, -4%): Equity market falls led to lower activity. The management of structured product portfolios was hit by sharp movements. Prime was good, cash business resilient and increase in trading volumes, but did not offset the fall in derivatives.

UBS (-13%, +9%): There had been a 4Q17 gain on the sale of a stake in the London Clearing House, but excluding that the business was still down 10% in 4Q18 on sharp declines in equity markets leading to lower client activity. Cash and derivatives both down. Prime brokerage also lower. Conditions adverse to new structure product transactions, especially in Asia where UBS is bigger than peers. The Americas was good on higher volatility.