Sector: Capital Markets: Results Review 4Q14

Capital Markets: Results Review 4Q14 / FY14

The FY14 operating revenue at the Top 13 banks totalled $182bn, 4% below FY13, as slight growth in primary fees was offset by a weak FICC (especially in credit) and soft equities (largely due to the weak 3Q14). Banks matched the fall in revenue with reduction in front office staff.

Operating expenses in FY14 amounted to $142bn, +7% y/y. Most banks cut comp & benefits in 4Q14, partly due to EU regulators limiting the size of bonuses (The UK unsuccessfully challenged this in court); Morgan Stanley, by contrast, cut the deferred level of bonuses and accelerated the vesting of cash awards. Litigation, compliance and IT spend all grew, in some cases sharply.

The US and EU regulators may be softening their stance on ‘risky’ banking activities. In the EU, there are signs that regulators’ concern about the reduction in liquidity in some markets may lead them to ditch plans for the separation of trading activities; and in the US, The Fed granted banks at least two years reprieve from the ‘Volcker Rule’.

Sector: Capital Markets 4Q14