The banks had a good first quarter, thanks largely to strong trading revenues — but now that’s starting to change.
In fact, bond volatility started to turn down back in March, even before the end of the quarter, reports The Wall Street Journal’s John Carney.
And without that volatility, traders aren’t able to take advantage of spreads between prices. That means they can’t make as much money.
After beating on the bottom line in the first quarter, Citigroup is now expressing concern about its trading department.
In a call last week, executives said fixed-income, currency, and commodities revenues were looking bad — just as this time last year, when executives were forecasting a 20 per cent drop in revenues.
In the end, Citi saw a 12 per cent drop in Q2 last year, while JP Morgan saw a 15 per cent drop and Goldman 10 per cent.
But, Carney reported, that’s actually kind of normal for second-quarter earnings, which follow the seasonally busy first quarter when everyone adjusts their portfolios and hedges for the new year.
So don’t worry, hopefully things will pick up again eventually.
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