Banks on course for blockbuster 2024 business revenues

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Banks are poised to generate their highest annual trading revenue since 2010 as equity derivatives and credit deals help fuel the business.

By 2024, the industry is expected to generate nearly $225 billion in business revenue.

This figure is In 2022, Russia’s all-out invasion of Ukraine rattled financial markets, slightly surpassing the blockbuster $224 billion it generated for bankers since 2010, when they generated $226 billion.

Flexibility Before the US election And the so-called yen vehicle trade has helped boost trading income beyond Wall Street analysts and investors’ expectations.

But banks have made a big profit in the securitization business The highest level of production since 2007As equity capital markets activity improves again, it supports the trading of equity derivatives.

Molly Devin of Coalition Greenwich said: “Banks’ market revenue has been stronger than we collectively predicted (2024).”

Following the 2022 high water mark. . . Ending at the same position (year-to-date) is considered a positive result for banks and better than expected.

After five years between 2014 and 2019, the latest data shows how Wall Street’s trading business is facing renewed competition from specialized electronic trading firms such as Citadel Securities and Jane Street.

The five biggest Investment banks They are on track to reach $112 billion in business revenue by 2024, according to estimates compiled by Bloomberg, again eclipsed by 2022.

Analysts at JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup forecast full-year revenue for fixed income and equity trading to rise 6.1% through 2023.

Of the five largest U.S. investment banks, only BofA is expected to earn comfortably more trading revenue in 2024 than in 2022 and 2023 — though the total is the smallest. Jim DeMarre, who heads the business for BofA, is considered a leading candidate to replace longtime CEO Brian Moynihan.

The end of the last decade was marked by low volatility in markets, rock-bottom interest rates and high regulatory and technology costs. Banks benefit when prices fluctuate rather than moving steadily in one direction.

Trading activity was fueled by the Covid-19 pandemic, a return to heightened market volatility, and geopolitical events such as Ukraine, as well as rising interest rates.

Big banks benefited as rivals, including Deutsche Bank, drove them out of business. Get out of stock trading And the demise of the Credit Suisse – allowed those still standing to hold on to more businesses.

“The top four or five[banks]have more market share today than they did 10 years ago,” said Gerard Cassidy, a banking analyst at RBC.

Banks specialize in financing prime brokerage in equity and lending to private investment companies with fixed income, businesses that are more valued by shareholders.

Unlike in 2022, when trading revenues were driven by commodity and macro trading activity, equity derivatives, credit and securities were the main areas in 2024.

Investors typically refrain from specifying high valuations for many business activities because they are unpredictable.

In 2019, we have been discussing with clients whether to reduce or exit low-return trades such as commodities and financial stocks. The conversation has changed,” said Devin of the Coalition.

“Our clients are not expecting income levels in pre-Covid markets to drop anytime soon.”