Major investment banks' revenue falls 9% in first quarter

LONDON (Reuters) - Revenue at the world's 10 largest investment banks fell 9 per cent to US$42.8 billion (S$53.5 billion) in the first quarter, new data showed on Monday, as tough new rules forcing banks to hold more capital led to a retreat from riskier types of trading.

Trading in fixed income, currencies and commodities (FICC) divisions fared the worst, with revenue down 16 per cent to US$22 billion, compared with US$26.1 billion a year earlier, according to consultancy Coalition.

Regulations brought in after the financial crisis that require banks to build up capital buffers to cover their risky assets have hit interest rate trading desks hard, sending revenue 19 per cent lower in the first three months of the year, while a lack of volatility led to a 26 per cent decline in foreign exchange trading, Coalition said.

Investment banks are reshaping themselves to increase their profitability and a number, including Deutsche Bank and Barclays have made cuts to FICC divisions to deal with weak volumes and the new regulatory environment.

Barclays said earlier this month it would cut 19,000 jobs, with 7,000 coming from the investment bank as part of an overhaul of the business.

Across all the investment banks tracked by Coalition, which include Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS, headcount dipped 3 per cent.

Commodity trading was the sole bright spot in FICC, with revenues climbing 26 per cent to US$1.8 billion due to higher US power and gas turnover and stronger investor interest.

Revenue from banks' equity business was lower in the first quarter, dropping 3 per cent year-on-year to US$11.2 billion, but investment banking divisions, which advise on mergers and acquisitions (M&A) and stock market listings, produced 4 per cent growth to bring in US$9.7 billion.

M&A and equity capital markets revenue rose 24 per cent and 8 per cent, respectively, Coalition said. The financial, telecommunications and healthcare sectors were particularly strong for deal-making, Coalition added.