JPMorgan, Goldman Expand Trading Lead as Europe Retreats
JPMorgan, Goldman Expand Trading Dominance as Europe Retreats
(Bloomberg) -- The biggest U.S. stock- and bond-trading firms are expanding their lead over smaller competitors, partly by grabbing market share from struggling European banks.
JPMorgan Chase & Co., the top fixed-income trader, posted the largest market-share increase for that business in 2019, while Goldman Sachs Group Inc.’s big gains on the equities side brought it within striking distance of No. 1 Morgan Stanley, according to data compiled by Bloomberg.
JPMorgan’s cut of the $84 billion market for trading bonds, currencies and commodities rose by close to a percentage point in a market that expanded 7% overall. Goldman’s share of the $48 billion pool of revenue generated from investors’ bets on stocks and related derivatives surged by 1.5 percentage points, the biggest gain by far in a market that shrank 10%.
At its annual investor day on Tuesday, JPMorgan highlighted market-share gains in the trading business and investment-banking unit. The firm’s global market share in trading has risen by 2.5 percentage points in the past four years, according to the company’s presentation.
U.S. banks grabbed market share from their European rivals for a second year, filling in the top four spots of both sets of rankings and pushing the U.S. share of total trading revenue in the 16-bank universe to 59% from 56% in 2017. European firms’ share dropped to 35% from 38%.
“The dominance of the large-cap U.S. banks remains intact,” owing in part to economies of scale, analysts at Credit Suisse Group AG said in a note earlier this month.
A handful of Europe’s biggest banks made some gains. Credit Suisse increased its share in both equities and fixed-income trading in 2019, recovering from market-share losses a year earlier.
Deutsche Bank AG, which held top-four rankings in both markets early last decade, lost more ground in both. The German bank shut its equities-trading division in the middle of 2019 as part of a multiyear restructuring effort.
HSBC Holdings Plc saw a sharp drop in fixed-income share, reversing previous gains posted when it was among the few European banks expanding its capital-markets business. The London-based firm is curbing its trading arm and focusing more on Asian business, which will lead to 35,000 job cuts.
Concentration in both markets increased as the top two firms now control about a third of each market. The biggest players have benefited from economies of scale, winning more business in recent years at the expense of smaller rivals.
European banks have been in retreat for several years as they restructure to focus on their most profitable units. Anemic growth in the region coupled with negative interest rates and a long list of scandals at many of the big banks have crippled those efforts, making it difficult for them to regain lost ground to North American or Asian rivals.
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Daniel Taub
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