Capital Markets
The aggregate operating revenue for the banks in this report topped $169bn in 9m24; 10% ahead of the prior-year period, primarily due to strong recovery in Banking fees. In Markets, strong growth in FICC in 3Q24 – especially in EMEA FX and Credit – offset some of the weakness seen in 1H24. Equities revenue jumped, driven by derivatives and cash.
In 9m24, pre-tax profit for the whole group grew 14% y/y. EMEA-headquartered banks outperformed their AMER peers in both revenue growth and cost control, in 3Q24 and 9m24. During 3Q24, two more banks in this report abolished the EU’s populist bonus cap for UK-based material risk takers. The size of banks’ own bonus caps varies widely between banks (6-25x). However, clawbacks and deferrals, mandated by the Bank of England from 2016, are still in place.
Commercial Banking & Treasury Services
Net interest income remains under pressure: ‘normalisation’ of deposit margins and a soft demand for loans – partly due corporates’ higher engagement in capital markets – were the most significant headwinds. Income from liquidity pools declined. The 2025 outlook for net interest income is not positive. A decline in base rates may accelerate the demand for loans, but the effect will likely be muted by elevated cost of deposits. Unsurprisingly, banks are focused on increasing non-interest income in their current markets and, in several cases, significant geographic expansion; as a result, we expect that costs will continue to outpace revenue, driven by higher comp and technology investments.