LONDON: Revenue at the world's 12 largest investment banks from trading fixed income, currencies and commodities, known as FICC, fell 9 per cent in 2015 compared with a year before, a survey showed on Monday, dragged down by regulatory changes and retrenchment.
Eight years after the global financial crash, banks are still struggling to adjust to reforms compelling them to hold more capital and liquidity, while litigation costs and market volatility have forced them to restructure, shed staff and exit some business lines.
Such trends have reduced the FICC activities which had been their most profitable business.
FICC trading revenue at 12 of the world's biggest banks was US$69.9 billion (S$98.30) last year, down from US$109.1 billion five years before, according to the survey by industry analytics firm Coalition, based on its analysis of their public disclosures and independent research.
Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.
Poor trading results and low client activity in the second half of 2015 contributed to an overall 3 per cent decline compared to a year ago in investment banking revenue across the world's major banks, to US$160.2 billion, the data showed.
In commodities, revenues dropped by 18 per cent, mainly due to slow business in metals and investor products, and also reflecting a return to more normal turnover in the power and gas markets after last year's surge.
Revenue earned by leading banks from commodity trading, selling derivatives to investors and other activities in the sector fell to US$4.6 billion from US$5.6 billion in 2014, it said.
"A normalisation of the US power and gas markets and weakness in metals and investor products drove the overall decline," Coalition said. "In contrast, oil revenues improved as corporate client activity increased."
In 2014, a cold winter in North America had created volatility and boosted activity in power and gas, while trading surged in the oil sector last year due to a sharp fall and then partial recovery in prices.
Banks' equity businesses, including cash equities, equity derivatives, prime services (serving hedge funds) and futures and options, were bright spots. Revenue rose 10 per cent to US$49.8 billion year-on-year.
Elsewhere, investment banking divisions (IBD), which advise on mergers and acquisitions (M&A) and equity and debt underwriting, saw a 5 per cent fall in revenue to US$40.5 billion, as a surge in M&A activity was offset by declines in equity and debt capital markets activity.
Headcount at the top banks fell 2 per cent from a year before. Cuts were felt in FICC, where there was a 4 per cent decline in staffing levels.
Return on equity (RoE) declined slightly to 9.2 per cent from 9.3 per cent, due to both increased capital requirements and weak performance, Coalition said.