Capital Markets: Overview
In aggregate, the banks generated $63bn in operating revenue in 1Q22: 8% below 1Q21, but 26% ahead sequentially. FICC and Equities were broadly stable, but Banking was depressed by weak underwriting fees, across DCM (except high grade bonds) and ECM.
Most banks – even those that typically ‘front-load’ comp and bonus accruals costs to the first half of the year – maintained strong cost control, particularly in comp.
It’s early days, but after extraordinarily profitable quarters in 2020/21, it’s fair to expect some tightening in comp in 2022. We expect that FY22 bonuses will be 20% down y/y in DCM and fixed income and 60% y/y or more in ECM; flat in M&A; and slightly higher in Equities.
Commercial Banking & Treasury Services
Commercial banking revenue advanced, driven by strong demand for corporate cash management, as well as higher loan volumes and net interest income. Large Cap/MNCs were particularly strong. Costs increased, too, but at a slower pace, especially at EMEA banks. The aggregate pre-tax profit at banks in this report reached $7bn, 6% ahead of 1Q21.
Transaction banking benefited from improved margins, deposit growth and higher payment volumes.