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FICC traders are saving the day at European banks

It’s Q2 results season, and a few things have become apparent.

Firstly, it’s shown that whilst investment banking division (IBD; M&A and capital markets) revenue is colloquially “in the gutter” for nearly every bank big or small, there’s still one source of revenue capable of being on par with last year (which, mind you, wasn’t a great year for banking): Fixed Income, Currencies, and Commodities (FICC) trading.

That’s especially true at the big European banks. Whilst Deutsche Bank was a bit of an outlier, with FICC revenues falling by 14% in the first half of this year compared to 2022, revenues were more resilient at Barclays and BNP Paribas, which only saw revenue falls of 6% and 3%, respectively.

Those results might be even sweeter at Barclays, which isn’t burdened by the same colossal litigation expenses as last year; but, at the time of writing, shares were sinking for interest-related reasons. That might sting a bit; the bank’s bonus pool fell by 6% for the half year, although salaries were up 11%.

Europe’s (relative) success is a big contrast to the mixed fate of the American banks. Whilst JPMorgan and Citi had FICC results in the same league, with falls of just 1% and 5% respectively, it was a different story at Goldman and Morgan Stanley, which both suffered a rather painful 21% fall. Only Bank of America provided a silver lining, with FICC revenue actually growing 24%.

That being said, European banks are much more reliant on FICC revenue than their rivals across the Atlantic. Data from market intelligence firm Dealogic shows that American banks dominate IBD revenues globally; only Barclays comes anywhere close (6th), but still well behind the all-American top five.

Q2 has also shown that the weak economy is still straining investment banking division (IBD; M&A and capital markets) revenue. That’s even more apparent at top boutique banks, with Evercore and Moelis suffering in particular – although, that being said, PJT Partners is showing that the storm can actually be weathered to some degree.

Of course, all eyes are on the new UBS-Credit Suisse entity, which delayed the publication of its Q2 results to the end of August (they were initially meant to come out earlier this week). The fate of European banking might just be on how well that chimera can compose itself.

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AUTHORZeno Toulon Reporter

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