According to research from Citigroup, the cash equity business was the strongest growing sector for banks in the second half of last year. But equity derivatives came a close second and, because derivatives margins are higher than those on the cash side, it is a reasonable presumption to make that it will have been the best business sector from a profit standpoint.
Ever coy about direct profit numbers, equity derivatives heads are nonetheless unanimously upbeat about overall performance. David Herzberg, global head of equity derivatives at JPMorgan, says: “In the past two years, we have doubled our equity derivatives revenue and 2007 was again a record year – although it would have been even better if the benign market conditions had continued beyond July.”
