J.P. Morgan Pulls Ahead in FICC Tussle

A much improved first quarter for fixed income, currencies and commodities units within the largest investment banks has resulted in J.P. Morgan pulling ahead of its rivals at the top of the global FICC league table, according to new research.

The U.S. trading giant was first in the table, with Goldman Sachs, Deutsche Bank and Citigroup tied in second place for FICC performance in the first quarter of the year, according to analytics firm Coalition. J.P. Morgan jointly held the top spot alongside Deutsche Bank and Citi in the first quarter of 2014.

The changes atop the FICC league table come after many of the largest investment banks recorded a year-on-year increase in FICC revenues in the first three months of the year.

Trading revenues rebounded in the first quarter helped by a spell of volatility, allowing most banks to post solid revenue increases. J.P. Morgan reported a 20% increase in FICC revenues in the first quarter versus a 10% increase at Goldman Sachs, a 9% increase at Deutsche Bank and an 11% decline at Citi.

(Earlier: Three Charts: Trading is Back on Wall Street)

But the good news for FICC businesses may not last.

Radi Khasawneh, an analyst in fixed income research at Tabb Group, said: “In the first quarter there was returning volatility in the rates market and that has continued on both sides of the Atlantic. But the overall trend hasn’t changed, which is a reduction in the amount of balance sheet deployed at the top 10 dealers. While the quarter-on-quarter figures continue to look relatively good, there are challenges overall for the business model.”

The rebound in the first quarter came after a 7% fall in FICC trading revenues at the top banks in 2014, leading some investment banks to slash front office headcount in their units and sparking a debate over whether the decline was long term, or more cyclical.

Declining revenues in recent years have led to diverging strategies, with some banks like Deutsche Bank and Citi staying largely committed to their FICC units, while others like UBS and Barclays have chosen to downsize.

Even among those who have stuck with big FICC businesses, there are worries that the FICC growth has softened in the second quarter.

Late last month, Bank of America Chief Executive Brian Moynihan said markets performance was likely to be "“flattish to down a little bit" for the second quarter compared with last year, while J.P. Morgan's Chief Executive Jamie Dimon said second quarter revenue across the bank's trading business woud be flat year on year. On Tuesday, Jefferies Group said earnings fell in the latest quarter due to a slowdown in fixed income.

Coalition awards equal ranks to banks with performance within 5% of the top bank in a given rank. The analytics firm uses a combination of public financial disclosures and independent research to benchmark results for the 10 largest investment banks globally.

Read more on Coalition’s rankings for equities and investment banking here.