CIB Review 4Q21/FY21

Capital Markets: Overview

The 14 banks in this report generated $50bn of revenue in 4Q21, lifting the 2021 total to $233bn, 8% up y/y. All three business areas registered a slowdown in 4Q21 compared to the first nine months of the year, but only FICC suffered a sharp drop, due to G10 rates, securitisation and credit. Equities were broadly unchanged vs 4Q20 and Banking surged, driven by M&A, ECM (except converts) and loans. The AMER leaders grew revenue 12% y/y in 2021, while EMEA-headquartered peers, in aggregate, stagnated.

The 2021 pre-tax profit was 8% ahead of 2020: AMER banks’ +12% y/y, Europeans’ -3% y/y.

1Q22 had a strong start, but the outbreak of war in Ukraine upended projections. Primary/issuance volumes and emerging markets credit and rates will likely take an immediate hit, but elevated volatility in other areas may compensate, at least to an extent.

Banks are scrambling to assess their individual exposures to Russia/CIS, both current and potential – especially their compliance with the raft of sanctions being rolled out against Russia and Russian entities. This won’t be easy: in an interview, JPM’s CEO Dimon pointed out there is a real possibility of unintended consequences; e.g. limiting access to SWIFT is not the same as a clear sanction.

Commercial Banking & Treasury Services

Commercial banking revenue advanced 4% in 4Q21. Lending revenues and fees from LME clients were the primary driver, partly offset by deposits margin compression. SME/business banking also grew – driven by uptick in revolver utilisation rates, a trend that is shifting to larger clients – but at a slower pace.

Most banks in this report reported higher volume of referrals between commercial and investment banking. In Treasury services, the positive impact of higher balances and margins and client activity, especially in LME, were offset by lower deposit spreads.

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