Revenue from fixed income, commodities and currency (FICC) sales and trading at the world’s leading investment banks increased by 57.9% for the first six months of 2020 compared with the same period in 2019. Equities sales and trading revenues also increased, by a more modest 12.1%.
The data, from McKinsey CIB Insights, analysed the FICC and equities performance of the world’s top 10 banks in the first half of 2020, a period marked by economic instability, market volatility and increased credit spreads.
The significant increase in FICC revenues was driven largely by strong performances across macro products such as commodities, G10 currencies and G10 rates with high volatility, particularly in April. Product revenues for G10 foreign exchange, commodities and G10 rates grew by 87.3%, 92.5% and 183.8%, respectively, when compared with the first half of 2019.
Credit performs well
The strong performance in macro products offsets a weakening in spread products (covering credit, US municipal and securitisation markets), where revenue dropped 5.4% year-on-year. In US municipals, revenues halved from $1.6bn to $800m and securitisation revenue dropped by almost a third, with agency residential mortgage-backed securities the only product category that performed well when measured over the full six-month period. Credit products, however, were strong, with revenue increasing by 30.3%, driven by investment-grade and high-yield gains.
In equities, equity derivatives accounted for the largest share of revenue increases, with growth of 45.8% year-on-year, although futures and options and cash equities also saw revenue growth of 21.4% and 20.9% respectively. These increases offset a drop in performance for prime services, where revenues fell by 22.1% after suffering curtailed and cancelled dividend payments in Europe, deleveraging and ongoing margin pressure.
US banks continued to outperform their European peers by a significant margin. The five US banks analysed achieved $37.1bn in FICC revenue, an increase of $15bn from 2019, compared with $16.8bn for European banks, whose revenue increased $4.8bn compared with 2019. It was a similar story in equities, where US banks earned $17.3bn in 2020 compared with $13.5bn last year. The total for European banks was $6.2bn, a $1.3bn decline on the previous year.
