US banks lead the equity trading revenues in Q2

August 13
9:12 PM 2015

Morgan Stanley, JPMorgan Chase and Goldman Sachs were the top-three beneficiaries in equity trading revenues during the second quarter of 2015.

However, the adverse conditions in China and Greece are likely to impact on revenues in the third quarter. The top three banks put together account for over 40% market share in equities trading.

The turbulent market conditions in the world's second-largest economy and uncertainty in Greek economy will reduce the equity trading revenues, according to a report by Keefe, Bruyette & Woods (KBW).

Morgan Stanley topped the list of 13 banks engaged in trading revenues during the quarter. Morgan Stanley's trading revenues during the quarter grew 26.9% to $2.27 billion. Goldman Sachs registered trading revenues of $1.97bn.

JPMorgan stood at third slot with trading revenues of $1.58bn with a growth rate of 26.8%. In terms of market share in trading, Morgan Stanley has 15.8% followed by Goldman Sachs with 13.7% and JPMorgan with 11% market share.

In 2014, Goldman Sachs topped the list of major banks in equity trading with total equity revenues of $1.9bn followed by Morgan Stanley with $1.57 billion, JPMorgan with $1.15 billion, Bank of America with $960mn and Citigroup with $666 million.

As part of crisis management, the Chinese government has been taking several measures to bring back normalcy into the market. Towards this, the dragon country relaxed norms to keep tabs on trading in Chinese stocks. This has helped many banks in equities trading during the second quarter, opines KBW.

The stock markets in the US and the European Union (EU) are witnessing encouraging growth so far during the third quarter as well. The major reason for this equity volume growth is soaring transactions in derivatives as banks and financial institutions prefer to offset the risk in spot trading. Derivatives offer different products in futures and options (F&O) to offset the risk in equity trading. 

Bank of America's (BoA) equity revenues grew 13.1% to $1.18 billion while Citigroup's trading revenues eased by one percent to $653 million. Equities outperformed fixed income, currencies and commodities (FICC) in trading revenues. FICC trading revenues fell by 12.1% on year-on-year (YoY). 

Last year, the high volatility in the debt market forced the banks to do more trading in equities to minimize the risk. Generally, the fourth quarter of any year would be slack. During the fourth quarter of 2014, debt trading revenues of major banks fell steeply following the adverse conditions in the debt market triggered by unforeseen volatility. 

Many US banks have revised their business strategies after the negative impact caused by the debt market. Banks such as Morgan Stanley have adopted new trading strategies on equity trading as trading in fixed income dwindled down steeply. 

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