The six largest US banks collectively produced a record $51 billion of trading revenue in the preceding quarter. Their next results begin today, and the comparison is already less forgiving. LSEG forecasts cited by Reuters imply roughly 12% year-over-year trading-revenue growth, well below the prior quarter’s 36% surge. Goldman is expected to show about 30% growth; Bank of America may decline.
The useful increment is not another prime-brokerage growth statistic. It is the test of banks’ claim that this revenue has become durable. The collapse of the $45 billion Situational Awareness hedge fund removed a large client and, Reuters says, hundreds of millions of dollars of trading revenue from the mega-banks. That does not prove any bank relaxed limits, nor does it allocate the loss among them. It does create a cleaner question for this week’s results: how much of the record quarter was a structurally larger business, and how much was unusually favorable client activity that cannot repeat on command?
Reuters Breakingviews — “Wall Street’s trading high will be hard to kick,” October 12