US investment banks have announced a mixed set of results during the past week. A preliminary look at the numbers shows that Citi, Goldman Sachs and J.P. Morgan all booked improvements, while Bank of America Merrill Lynch and Morgan Stanley lost ground.
None of the banks provide a separate regional breakdown of revenues for advisory, equity capital markets and debt capital markets, and J.P. Morgan's breakdown is somewhat buried. Across the four banks that publish separate numbers, total revenue from DCM and advisory declined from the previous quarter, by 3% and 19%, respectively, while ECM revenues rose 28%.
Goldman continues to outshine, with total investment banking revenues rising to $1.56 billion, up 12% on the fourth quarter and 36% on the first quarter of 2012.
Even so, Harvey Schwartz, the bank’s chief financial officer, sounded a cautionary note on a call with investors, saying that fees from equity underwriting were still “relatively muted by historic standards”, despite the sequential growth, while announced M&A volumes were down 37%.
“Macroeconomic uncertainty has been an understandable and consistent theme following the onset of the financial crisis, and had quite naturally led many of our clients to approach strategic decisions with greater caution,” he said. “As CEO confidence is such an important input to M&A and IPO activity, continued improvement in the macro environment will be a key driver of opportunity in these businesses.”
This uncertainty is clearly affecting all of the banks, to varying degrees.
Revenues at Bank of America fell 2% from the previous quarter to $1.6 billion, but were up 25% on last year. ECM was the only business to show growth against both quarters.This uncertainty is clearly affecting all of the banks, to varying degrees.
J.P. Morgan booked revenues of $1.4 billion, up 4% on the previous year and 25% on the fourth quarter.
Citi is the only bank to break out its Asia results, though only as a combined number for its “securities and banking” unit, which includes corporate banking, investment banking and the flow businesses. The unit reported quarter-on-quarter revenues up 60% to $1.36 billion and profit up 471% to $446 million, thanks mostly to the flow business and fixed income underwriting, according to Citi. Year-on-year profits were up 43%.
As with most of the banks, cost-cuts helped to improve profitability. “The bank’s expenses in Asia were down 7% quarter on quarter and the efficiency ratio was 53% [expenses/revenues], the best number for the bank in Asia for the last five quarters,” said Citi.
Citi’s global investment banking revenues have been growing steadily across the business since the second quarter of last year and reached $1.06 billion in the first quarter, up 22% since a year ago.
Morgan Stanley had the most disappointing performance, with total investment banking revenues of less than $1 billion, down 23% on the previous quarter.
However, at all five banks, double-digit quarterly growth in revenues from sales and trading offset much of the weakness in investment banking.
See the upcoming issue of FinanceAsia magazine for a more detailed look at the health of the investment banking industry.
