Global banks predicted to get 10% trading revenue boost on tariff turmoil
By Saeed Azhar
NEW YORK (Reuters) -Global banks including top U.S. lenders are expected to report a 10% gain in markets revenue as traders cashed in on shifting U.S. tariff policies, according to estimates from analysis firm Crisil Coalition Greenwich.
The projections follow a 15% gain in trading revenue in the first quarter for 12 global banks, the data showed.
Bank of America and Citigroup (NYSE:C) executives said last month they expect markets revenue to climb by mid-to-high single digit percentages in the second quarter, following a strong first quarter.
When U.S. banking giants report second quarter earnings next week, they could even beat those expectations, executives and analysts said. The gains come after U.S. President Donald Trump’s tariff announcements in April spurred volatility in stocks and drove volumes to a record in the U.S. Treasuries market, according to electronic trading platform Tradeweb Markets (NASDAQ:TW).
"Anybody that’s in the market-making business, providing people with instantaneous liquidity, is going to benefit," said a senior Wall Street executive who declined to be identified discussing client activity.
"Stocks went down, bonds went down, and the currency went down - your portfolio was just more risky, and we just saw derisking."
Coalition bases its estimates on 12 global banks, including JPMorgan Chase (NYSE:JPM), Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo, as well as European rivals.
"Volatility is the friend of markets revenue," said Mollie Devine, head of markets competitor analytics at Coalition. Some of the tariff announcements were a "positive catalyst" for trading desks, she added.
Equities performed better than fixed income and currencies, Devine added, even though stock markets are smaller than those for bonds or foreign exchange. She estimated equities revenues would gain 18% in the second quarter, while bonds would climb 5% compared with the previous year.
PATH TO NORMAL
Banks are seeing sustained levels of higher trading activities given volatility around tariffs, interest rates and geopolitics, said Mike Mayo, an analyst at Wells Fargo.
"The higher trading in the last few years is not an aberration, but more a path back to normal after 15 years of zero percent interest rates," he said.
Tradeweb Markets, which operates electronic marketplaces for rates, credit, equities and money markets, reported average daily volume of $2.7 trillion in April, up 38.6% from a year earlier. It posted a record $2.71 trillion average daily volume in March.
Activity in U.S. government bonds on Tradeweb’s platform surged to a record in April, including the biggest weekly jump since 2001, as yields rose after U.S. President Trump’s initial tariff announcements stunned markets.
Coalition forecast markets revenue would grow about 7% for banks in its index for 2025, compared to a 13% gain projected for the first half. The 2025 revenue projection of $246.2 billion is the best since 2009, the year after the onset of the global financial crisis, the data shows.
Separately, Mayo at Wells Fargo predicted trading revenue would be up 8% in the first half for major U.S. banks, then slow to 5% in the second half and remain in low single-digit percentages next year.
"The immediate effect of the tariffs was to exaggerate the extent of trading" and the effect of tariffs will recede as time passes, he said.
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