Fitch: U.S. 4Q'14 Bank FICC Revenues Take a Hit; M&A Alone Can't Move the Needle
Fixed Income Currency and Commodities (FICC) accounted for 37% of total investment banking revenues in aggregate during the 4Q'14, down from 47% in 3Q'14 and 44% year-over-year as low volatility took its toll on client activity levels and spreads.
The Goldman Sachs Group showed the largest decline in FICC revenues on a quarterly and year-over-year basis, while J.P. Morgan was the sole outlier, increasing its market share and grabbing more than 26% of overall capital markets revenue in the final quarter of the year.
'While a strong M&A environment has been helpful in offsetting some of the declines in FICC, capital markets revenues are still key,' said Justin Fuller, Senior Director.
A combination of structural factors, like evolving regulation and restrictive capital requirements, and cyclical factors, like low interest rates and volatility, point to more of the same in the next few quarters, even as the environment remains conducive to M&A.
Four of the five U.S. Global Trading and Universal Banks (Bank of America, JP Morgan, Goldman Sachs and Morgan Stanley) saw stronger advisory revenues in 4Q'14, while Citigroup experienced a decline. The overall trend is likely to continue as M&A backlogs remain strong, and could boost debt and equity underwriting revenues as well.
The full report, 'U.S. Banking Capital Markets Update: 4Q'14,' is available at 'www.fitchratings.com'.
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