IAFEI: S&P Global Ratings

S&P Global Ratings published: For Global Banks, The Fickleness Of Capital Markets Revenue Is On Full Display.

Global capital market activity is off to a slow start in 2019–after relatively flat results in 2018–with revenue down 11% year over year in the first quarter. All components of capital markets revenue (fixed income, currencies, and commodities; equities; and investment banking) declined, largely due to lower client activity and low issuance volume compared with a robust first-quarter 2018. The U.S. government shutdown in the beginning of the year also didn’t help matters.

Market conditions started to improve somewhat since the slow start to the year, but the escalation of trade disputes, coupled with tough year-over-year comparisons, point to a down second quarter. A continued flat and low interest rate environment will also likely pose a headwind to trading revenue. Notably, some of the large banks have already announced mid-single-digit declines in trading revenue for the first two months of the second quarter, with investment banking fees declining even further. Positively, comparisons become more favorable in the second half of 2019. All in all, S&P Global Ratings looks for global banks’ capital markets revenue to be down roughly 10% in 2019.

Read the full article, along with further key takeaways here.

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