Discover your dream Career
For Recruiters

The banks and their divisions that are starting 2019 with a big cost problem

As we move into the second quarter of 2019, leading banks will be hoping for a reprieve from the first quarter. JPMorgan said in late February that its sales and trading revenues were down in the "high teens" in percentage terms compared to the start of 2018. Analysts at KBW agree that banks' Q1 fixed income trading revenues will be down anything from 3% (Goldman Sachs) to 16% (JPM) and that equities revenues will be down anything from 1% (HSBC) to 16% (BNP Paribas) over the same period. The second quarter had better be good.

What if it's not? Market intelligence firm Tricumen has just issued some new data on which banks could be swimming naked when the revenue tide goes out. It's not entirely pretty. Some are far fatter than others. 

In fixed income, currencies and commodities (FICC) trading, Tricumen suggests Deutsche Bank has a problem. The chart below shows the comparative cost-income ratios in FICC at 10 leading banks for 2018. Tricumen says Deutsche is by far the worst, followed by BNP and Morgan Stanley.

Comparative cost income ratios, 2018, FICC

Source: Tricumen

Guess who's cost a problem in equities trading? Yes, it's Deutsche Bank (which allegedly lost $750m in equities last year) again. Tricumen says Deutsche's cost-revenue ratio was awful compared to other banks in 2018. After Deutsche, Morgan Stanley and Bank of America Merrill Lynch (now known as Bank of America Securities) are the most encumbered. 

Comparative cost income ratios, 2018, equities 

Source: Tricumen

Comparative cost income ratios, 2018, banking

Lastly, Tricumen took a look at the comparative cost income ratios for banking divisions in 2018. It defines 'banking' as: debt capital markets bonds and loans, securitisation, equity capital markets, and M&A (ie. the traditional investment banking division or IBD). Here, it's not Deutsche Bank that's overweight (surprise!), but Credit Suisse and UBS. Deutsche is on a par with Barclays.

 

Source: Tricumen

If you've been looking carefully, it may not have escaped your attention that JPMorgan's investment bank seems in particularly good shape for 2019. Its cost ratio is one of the best in every market. Not for nothing did Daniel Pinto say recently that JPMorgan's fixed income returns are “very high." And the same seems to apply to every other area.

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com in the first instance. Whatsapp/Signal/Telegram also available. Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)

author-card-avatar
AUTHORSarah Butcher Global Editor

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.

Boost your career

Find thousands of job opportunities by signing up to eFinancialCareers today.
Latest Jobs
Paritas Recruitment - Audit
Audit Manager - Securities
Paritas Recruitment - Audit
New York, United States
Asian Infrastructure Investment Bank
Senior IT Internal Auditor (Base in Beijing)
Asian Infrastructure Investment Bank
New York, United States
State Street Corporation
Software Engineer - Payments
State Street Corporation
Quincy, United States
State Street Corporation
JAVA Development Lead, Assistant Vice President, Onsite
State Street Corporation
Quincy, United States
State Street Corporation
Emerging Technologies Governance Lead, MD
State Street Corporation
New York, United States
State Street Corporation
Offensive Security External Red Team Lead
State Street Corporation
Quincy, United States

Sign up to Morning Coffee!

Coffee mug

The essential daily roundup of news and analysis read by everyone from senior bankers and traders to new recruits.