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 in FICC trading predicted by some market analysts did not materialise in 3Q14; on the contrary, only credit revenues declined – slightly. Revenue/headcount productivity rose sharply in FICC compared to 9m13, partly due to banks’ continued trimming of staff in 2014.
Year-to-date operating expenses grew, however, by 6% to $108bn (excluding prop & principal investments), reducing the cumulative pre-tax profit to $31bn, 21% below 9m13. Banking profitability increased during this period by 10%, but FICC and Equities suffered sharp drops. The drop in equities’ profitability was largely due to the weak 3Q14, and was more pronounced among cash equity ‘flow monsters’.