JPMorgan trading bonanza creates bonus dilemma
JPMorgan had a strong first quarter for trading revenue, but its disaster windfall creates a dilemma over future bonus payments for key staff.
But although fixed income revenue rose by 34% to $5 billion and equities by 28% to $2.2 billion, some of the gains may be fleeting and insufficient to balance an expected prolonged slump in deal-making fees.
JPMorgan also now faces a dilemma over how to compensate trading staff who are able to profit from the volatility in markets caused by the onset of the coronavirus crisis.
JPMorgan chief financial officer Jennifer Piepszak cautioned investors against assuming that markets revenues will remain strong enough to partly offset the lower deal flow and huge increase in credit reserves required by the downturn.
Jennifer Piepszak, JPMorgan
“Low rates and economic activity may even be a headwind,” she said on the bank’s quarterly earnings call with analysts.
A strongly performing global markets division is nevertheless incorporated in the updated assumptions that JPMorgan provided on its expected overall revenues for 2020.
Fixed income revenue growth in the first quarter was driven by increased client activity and wider spreads in rates, currencies and emerging markets trading.