Wall Street investment banks had a lousy January and February.
That put a serious dent in revenues, as the first quarter of the year is usually responsible for a disproportionate fraction of annual revenues.
March and April were better, and we’re now midway through May.
So far, two months have been terrible, and two months have been OK-ish. So where do we go from here?
According to JPMorgan banks analyst Kian Abouhossein, the answer is probably down.
In a note Thursday, he cut earnings per share estimates by 2% to 4% for global investment banks between 2016 and 2018. The reason: the bounce back from the terrible start to the year just hasn’t been strong enough.
He said (emphasis ours):
Following weak IB revenue performance by Global IBs in Jan & Feb, we saw signs of improvement in March which have only continued in credit (within markets) and ECM in 2Q, with the remaining businesses showing normal seasonal slowdown.
- Second quarter fixed income, currencies and commodities revenues will be down 5% from the first quarter. That is better than the typical drop from Q1 to Q2, but it still represents a weak quarter.
- Second quarter equity trading revenues will be down 9% quarter-on-quarter, with strong equity derivatives revenues, and weak cash equities revenues.
- Total investment bank revenues will be down 5% quarter-on-quarter.
That kind of a decline could have broad implications. We reported a couple of weeks ago that Wall Street banks were trying to figure out whether they should plan for more of the January/February-type volatility, and initiate more job cuts, or hold off in the hope that the more constructive March/April conditions continue.
If the current slowdown continues, it looks like there could be more cuts coming.