BofA, Goldman See Trading Stuck in Rut That Spoiled Last Quarter
(Bloomberg) -- Executives at two of Wall Street’s biggest trading firms shot down any optimism that the languor in that business is receding.
“It’s pretty similar to last quarter,” Bank of America Corp. Chief Operating Officer Tom Montag told investors at a conference the bank hosted Tuesday, referring to the performance so far in the fourth quarter. “The trading environment remains muted so you just don’t have the volatility or things happening” that could have “changed the pattern,” he said.
Goldman Sachs Group Inc. Chief Financial Officer Marty Chavez described a similar environment, adding the commodities unit is on pace for its worst year in the firm’s history as a public company. The quarter will also suffer from a difficult comparison to last year, when the results of the U.S. presidential election spurred client activity, he said.
“Any of us can look at the screen and see that the market backdrop that has been in place since the beginning of the year has continued into the fourth quarter,” Chavez said. “Volatility continues to be low and client activity continues to be subdued.”
Bank of America’s revenue from trading stocks and bonds declined 15 percent to $3.15 billion in the third quarter compared to a year earlier, with fixed-income trading falling 22 percent. Goldman Sachs suffered a 17 percent drop, driven by a 26 percent decline in fixed income.
Montag, who oversees Bank of America’s investment banking and lending businesses, said revenue from trading corporate credit is up this year but that fixed-income overall has been dragged down by rates trading.
On the bright side, Montag said that activity in the bank’s capital markets unit “seems pretty robust, actually.” Halfway through the period, issuance of investment-grade bonds has already matched 82 percent of the total for last year’s fourth quarter, according to data compiled by Bloomberg that excludes self-led deals.
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