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Dimon calls time on trading – and higher loan provisions

JPMorgan chief executive Jamie Dimon indicated that trading revenues could fall by 50% from their current elevated levels, but the boom has already helped to offset Covid-related loan provisions.


JPMorgan's Jamie Dimon expects trading revenues to fall sharply, possibly by as much as half

JPMorgan and Citigroup are the two biggest fixed income dealers and their second-quarter results on Tuesday confirmed another surge in debt trading revenues.

JPMorgan generated $7.3 billion of fixed income trading revenue for a 99% increase over the same quarter in 2019, while Citi produced $5.59 billion for a 68% rise.

The two banks were also beneficiaries of the Federal Reserve-sponsored boom in corporate bond issuance. JPMorgan’s debt capital markets revenue rose by 55% compared with the second quarter of 2019, for a total of $1.26 billion, while Citi increased bond underwriting income by 41% to just over $1 billion.

When things get bad in trading, spreads gap out – and all of sudden you’re making money in trading - Jamie Dimon, JPMorgan

JPMorgan’s value-at-risk for its corporate and investment bank also increased sharply to $127 million, for a rise of 189% compared with the second quarter of 2019, and 119% compared with the first quarter of 2020. 

The extra risk – almost all in higher fixed income exposure – seems to have been taken wisely, given that the increase in trading revenue was helped by what chief financial officer Jennifer Piepszak described as an ability “to better monetize flows”, especially in macro products.

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