Second-quarter revenues at major U.S. and European investment banks grew on the back of strong equities trading, which continued to gain traction thanks to market volatility, according to the latest data from business intelligence firm Coalition.
Total revenues at the world's 12 largest investment banks tracked in Coalition's IB Index rose 9% year over year to $42.5 billion. Coalition's sample includes European groups Barclays PLC, BNP Paribas SA, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, Société Générale SA and UBS Group AG, and U.S. banks Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp.
Second-quarter equities revenues surged by 13% year over year to $12.7 billion, compared to a 7% year-over-year rise in fixed income, currencies and commodities, or FICC, to $18.4 billion. Investment banking divisions, or IBD, revenues, including earnings from advisory services, equity and debt underwriting, also grew 7% to $11.4 billion.
Looking at first-half revenues, equities jumped by 20% year over year to $26.6 billion, while FICC remained stable at $38.5 billion and IBD inched up by 2% year over year to $21.4 billion.
Equity derivatives and prime services were the clear drivers of equities trading growth in the first half, reaping the biggest benefits from the return of volatility in the global capital markets. Equity derivative revenues hit their highest level since the first half of 2013, leaping 35% year over year to $8.9 billion as of June 30, Coalition data shows.
There has been a greater divergence between fixed income and equities compared to a year ago, particularly in the U.S. where credit has largely underperformed equities, Andrew Jackson, head of fixed income at London firm Hermes Investment Management, said in an email.
Overall, U.S. fixed income performed better than European fixed income, he said. This was due to worries around the election of a new anti-establishment government in Italy in May and troubled negotiations regarding U.K.'s exit from the European Union. Those effects, coupled with trade tensions between the U.S. and the EU and the European Central Bank's plan to end quantitative easing, affected bond trading in Europe in particular.
On the other hand, commodities had their best first half by far in recent years thanks to a surge in the U.S., base metals and — to a lower degree — oil, according to George Kuznetsov, Coalition's head of research and analytics. Commodities revenues jumped 38% year over year to $2.1 billion as of June 30. G10 foreign exchange rates were the second-biggest riser in the FICC group of products, surging 21% year-over-year to $4.5 billion as of June 30. The forex growth had a positive effect on emerging-market macro products, which rose 9% year over year to $6.7 billion.
In IBD, total first-half revenues edged up 2% thanks to higher M&A advisory and equity underwriting. On the other hand, debt underwriting revenues dipped mainly because of a decline in bond issuance, Coalition said.
The first half of 2018 saw the highest level of M&A deals since the financial crisis, according to statistics firm Dealogic. There were 17,611 transactions with a total volume of $2.49 trillion in the first half, which was 57% above the volume booked in the prior-year period, the firm said. On the other hand, second-quarter global bond issuance hit a three-year low. "Bond activity continues to be affected by news of interest rate hikes and market reaction to the current political environment," Dealogic said.
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Coalition is owned by Crisil which, with S&P Global Market Intelligence, is part of S&P Global Inc.