U.S. Global Trading and Universal Banks (GTUBs) reported strong Capital Markets earnings for the first quarter of 2018, however it will be hard for the U.S. GTUBs to beat first-quarter earnings later in 2018, according to the latest Capital Markets Quarterly report from Fitch Ratings. U.S. GTUBs saw an overall increase in capital markets both on a linked quarter basis and yoy. Aggregate results were the strongest since first-quarter 2012 for the group. JP Morgan Chase & Co. (JPM) led the group and retained number one market share.
"The first quarter is typically the strongest of the year and this quarter's higher market volatility boosted equity trading results," said Joo-Yung Lee, Managing Director, Financial Institutions at Fitch Ratings. "It remains to be seen whether market volatility will continue throughout the year and these results are sustainable."
Equity volatility drove equities trading revenues higher across all firms on a yoy and linked quarter basis. The Goldman Sachs Group and Morgan Stanley maintain their solid number one and number two spots, respectively, reflecting their strong franchises in this business. In addition, Citigroup, Inc. had its best equities trading quarter since 2010 and both Bank of America Corporation and JPM had record quarters. Overall, Fixed Income Currency and Commodities (FICC) trading revenues were up modestly year over year, after a very strong first-quarter 2017. Strong foreign exchange and commodities trading boosted FICC results.
Banks reported weaker investment banking activity, but many touted strong backlogs and M&A pipelines, which could be unleashed now that uncertainty over tax legislation has been resolved. For first-quarter 2018, investment banking revenues were down across advisory and underwriting for both debt and equity, reflecting lower industry completed transactions. Investment banking performance will depend on whether greater certainty around tax legislation and continued economic growth outweighs uncertainties related to trade or other macro factors that could weigh negatively on activity.