US Banks’ Profits Rise Despite Fall in Bond Trading

Bond traders at big banks in America continued to struggle in the third quarter, with JP Morgan and Citigroup reporting sharply lower revenue from their fixed-income desks.

JP Morgan, the country’s biggest bank by assets, said that revenue from fixed income trading fell 27%. Citigroup, the fourth largest lender, reported a 16% drop, Yahoo reported.

Investors took defensive positions between July and September last year after the European Union referendum vote in June and before the US elections in November.

The increased demand for bonds, currencies and fixed income products helped banks to report record trading profits last year. However, fixed income trading has been muted this year and markets have lacked the volatility that traders need to make large profits.

Banks have instead been looking to their lending businesses, which have benefited from rising interest rates and increased deposits. JP Morgan posted an overall profit of $6.7 billion, up from $6.3 billion a year ago, as revenue climbed to $26.2 billion from $25.5 billion. The figures were ahead of analysts’ forecasts. Shares fell by 0.9% to close at $95.99 in New York last night.

Fixed income trading revenue fell to $3.2 billion from $4.3 billion a year ago, pulling overall trading revenue down by 21% to $4.5 billion. Revenue from equities trading was down by 4% to $1.4 billion.

Octavio Marenzi, of Opimas, said that JP Morgan’s fixed income desk was “starting to increasingly look like a millstone around the neck of the company” and was “screaming out to be right-sized”.

Jamie Dimon, chairman and chief executive of JP Morgan, warned last month that the bank’s third-quarter trading profit would fall by about a fifth but predicted that volatility would soon return to markets.