Theme: Rates markets vignettes
Rates markets vignettes Periodically, we compile series of snapshots on markets that have seen interesting developments in recent times. This note includes a selection of such high-level snapshots for Rates markets, with special emphasises on EMEA and Americas.
Banks: Goldman Sachs Liberty Harbour
Goldman Sachs Liberty Harbour (GS BDC Inc.) We originally published this report in Jan-13 (the report is attached). In this update, we note that GS now plans to list the unit on NYSE, as Goldman Sachs BDC Inc (ticker: GSBD). At the end of 2013, GSBDC had net asset value of $575m; GS owns just […]
Sector: Capital Markets: Results Review 4Q14
Capital Markets: Results Review 4Q14 / FY14 The FY14 operating revenue at the Top 13 banks totalled $182bn, 4% below FY13, as slight growth in primary fees was offset by a weak FICC (especially in credit) and soft equities (largely due to the weak 3Q14). Banks matched the fall in revenue with reduction in front office […]
Theme: Future Strategies for IDBs
Future Strategies For Inter-Dealer Brokers The current market is dominated by five inter-dealer brokers (IDBs). While the voice-broked interbank market dominates the revenue pool, it is also the least profitable. IDBs face changing markets, margin compression and challenges from market trading. We suggest three strategies: (1) build the first fully electronic rates platform; (2) build product-specific networks […]
Theme: RWA dynamics FY11-FY14E
RWA dynamics FY11-FY14E European banks included in this note reduced their RWA much more aggressively than their US peers, and have enjoyed a far greater improvement in FY11-FY14E revenue/RWA, largely due to their faster adoption of Basel 3. In securitisation, credit and commodities, the key driver of RWA returns for US banks was revenue; Europeans, by […]
Banks: Credit Suisse Prime Service, IB targets and achievements
Credit Suisse: Prime Service, IB targets and achievements Credit Suisse is scaling down its Prime Services unit. The revenue impact may be minimal: the bank has a strong synthetic financing capability, which could be folded into equity derivatives. We disagree with the mainstream media’s unflattering coverage. CS’ cautious approach to restructuring is justified by the uncertain […]
Sector: Capital Markets: Results Review 3Q14
Capital Markets: Results Review 3Q14/9m14 Capital markets operating revenue at the Top 13 investment banks totalled $144bn at the end of 9m14, barely behind 9m13. During the three months of 3Q14, operating revenues reached $43bn, slightly ahead of 3Q13 as strong ECM, M&A, FX and rates offset falls in DCM and equities revenues. The decline […]
Sector: Capital Markets: Results Review 2Q14
Capital Markets: Results Review 2Q14 / 6m14 The capital markets 6m14 revenue for the Top 13 investment banks totalled $101bn, 3% below the prior year period. FICC weakened 9% during this period to $46bn, and equities revenue declined slightly too; but this was partially offset by strong issuance and advisory fees, and a modest advance […]
Theme: Capital Markets revenues and banks’ valuations
Capital markets revenues and banks’ valuations The variance of capital markets earnings is often said to (1) heighten the volatility of the share price and/or (2) depress the market valuation. For the banks included in this note, we find no evidence that the first assumption holds true … … but we do identify a strong correlation between […]
Theme: A perfect storm
A Perfect Storm Commentators cite a decline in volumes and lack of volatility as being the key reasons for a drop in rates trading revenues. Our analysis shows that the situation is more complex. Several regulatory, market and risk management factors have combined to create a ‘perfect storm’ in rates markets. We expect that some […]