JPMorgan Chase & Co. (NYSE:JPM) And Others Victim Of ‘Wrong Type Of Volatility’

Some of the major U.S. banks including JPMorgan Chase & Co. (NYSE:JPM) are experience is a very week so far. The combined trading revenues of JPMorgan, Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC) are down by 23%. Among these, JPMorgan Chase & Co. (NYSE:JPM) took the worst hit as it reported 23% fall in the revenues. The decline in the combined trading revenues is worst since 2011, which was a result of slump in fixed income, commodities and currencies, according to Bloomberg’s Caroline Hyde.

Have an analyst breakdown the Bollinger Bands for JPM.

Cause Of Dismal Revenues

Hyde said that though there has been some pickup in the equity trading, but it was largely inadequate to compensate the slump from three segments. Hyde calls the situation as wrong type of volatility. By that it means that the U.S. banks need consistent volatility, enough to drive people to trading desks and put some trades. Bank of America Corp (NYSE:BAC) CFO Bruce Thompson said that banks want good volatility, where interest rates are rising and clients are actively participating in trades. Citigroup Inc (NYSE:C) CFO John Gerspach said that the volatility is not just right and does not encourage activity. Gerspach said that earnings from the trading desk would stablize when the environment will become predictable and boring.

Lowered Trading Expectations

Meanwhile, JPMorgan Chase & Co. (NYSE:JPM) CFO Marianne Lake said that some strength in the fourth quarter was due to either clients seeking to capitalize on a robust U.S. dollar or to hedge against oil. The absence of standard calculus led the bank executives to modestly adjust their trading expectations. JPMorgan Chase & Co. (NYSE:JPM)’s Lake expects overall trading revenue to decline by 4%. The dismal revenue picture by the banks came when the U.S. economy is in recovery phase.

Following the turn of events, most of the banks are offsetting the poor revenues through trimming down bonuses. JPMorgan Chase & Co. (NYSE:JPM) has said that it will cut 15% in bonuses this year, while Citigroup Inc (NYSE:C) will go ahead with 5-10% bonus cut.

About the Author

Coper graduated from the University of Chicagi with majors in political science and journalism.

Leave A Response