Bank trading bonanza continues in second quarter
Banks are on track to report another strong quarter in sales and trading after US president Donald Trump’s chaotic tariff announcements in April rocked financial markets and triggered a flurry of client activity.
Banks’ markets revenues increased 10%–15% in the second quarter from the previous year, according to data provider Coalition Greenwich, as trading desks continued to thrive in the high-volatility environment that has characterised the first half of the year.
Equities trading divisions led the charge, with Coalition Greenwich projecting a 20%–25% annual increase in revenues. That comes on the back of several banks reporting a record quarter for equities trading revenues in the first three months of the year. Fixed income trading, meanwhile, is expected to register a more modest 5%–10% growth in the second quarter following an uptick in foreign exchange and interest rate trading.
“Q2 was another strong quarter for banks in sales and trading, with equities and macro products doing particularly well,” said Angad Chhatwal, head of fixed income, currencies and commodities at Coalition Greenwich. “Banks benefited from a notable increase in client trading activity and widening in bid-ask spreads around the April tariff volatility, with some likely to outperform because of their business mix.”
The trading bonanza contrasts with a frustrating period for dealmaking. Global investment banking fees declined 3% in the first half as strong debt capital markets activity was offset by more sluggish M&A and ECM activity.
However, the market volatility that put the brakes on mergers and IPOs provided a boost for banks' trading desks, which have seen record volumes of transactions across various asset classes. Equities trading has been at the forefront of this expansion after several banks reported record revenues in 2024. Many banks are continuing to invest in this space, particularly in businesses such as prime brokerage that have grown rapidly amid huge demand from hedge funds for financing.
“I think we can gain market share in markets,” Troy Rohrbaugh, co-chief executive for the commercial and investment bank at JP Morgan, told investors in May. “We continue to see the benefits of our investment in equities. We're growing ... and deepening our client franchise across the whole space.”
FX trading has been a particular bright spot for banks' fixed income divisions after a sharp reversal in the US dollar ignited market volatility and prompted investors to shuffle their currency exposures. CLS said average daily trading volumes submitted to the FX settlement infrastructure group hit a record US$2.5trn in April after Trump announced sweeping tariffs against US trading partners.
“Foreign exchange is the driving force behind the outperformance in macro trading. Rates products also picked up, helping to offset declines in spread businesses,” said Chhatwal.
Some banks sustained fixed income trading losses during the April turmoil, a factor that could weigh on revenues, although most appear to have rebounded quickly and have capitalised on the upturn in client trading activity.
Coalition Greenwich said banks' performance in fixed income will depend on business mix (the size of their macro trading operations compared to credit trading); client mix (how prominent they are with institutional investors over corporates); and “trading one-offs”.