In 2Q15, Top 13 banks’ capital markets revenue reached $47bn, bringing the 1H15 total to $101bn – exactly in line with 1H14, as Equities revenue compensated for the decline in FICC.
Operating expenses totalled $74bn in 1H15, in-line with 1H14. Primary activities and Equities increased expenditure, largely through performance-related comp, but a decrease in FICC costs compensated. Revenue/headcount productivity improved slightly as a result of a surge in equities revenue and continued trimming of FICC headcount. Our analysis includes large fines paid by Goldman Sachs and Deutsche Bank (which booked this item in Corporate Centre).
The Fed’s July-15 ruling on capital rules for large US banks addressed most of the concerns put forward by banks. Banks are now able to calculate the surcharge based on their own size, complexity and risk, without the need to consider peers’ conduct, and will also utilise 3-year daily average FX translation. Citi is probably the greatest beneficiary, having received the 3.5% – instead of the expected 4% – surcharge requirement (see the Company Section).