“our reported results will be down in the high-teens, which is a lot, but… our core performance, in terms of year-over-year performance is 4% down”
- JPM CFO Marianne Lake
“the environment right now … we expect to be down this quarter and versus last year, we expect to be down in this business, but it's consistent with the opportunities that we see our customers are taking”.
- BAC CEO Brian Moynihan
It appears that the Q4 earnings season "bloodbath" predicted by harbinger Jefferies is right on track. According to Citigroup, Q4 is shaping up to be nothing short of a disaster for bank earnings. To wit:
Based on Dealogic, primary revenues over Oct-Nov were down 17% yoy, impacted by a sharp decline in lending revenues while underwriting revenue were mixed with stronger DCM, offsetting weaker ECM. Nonetheless, the advisory pipeline strengthened boding well for future revenues.
- Primary revenues decreased 17% yoy over Oct-Nov, notably impacted by weaker lending trends, per Dealogic industry data. Issuance revenues also declined while advisory revenues increased slightly.
- Loans revenues fell 61% yoy over Oct-Nov with leveraged finance particularly lower, given weaker market conditions [ZH: uhm, market hit all time highs in both October and November?!]. By contrast, DCM revenues increased 11% over the same period, primarily driven by higher IG issuance (+27% yoy), partially offset by lower HY, down 12% (Figure 31-Figure 32).
- Equity Issuance declined 16% yoy over Oct-Nov (Figure 30), due to tough comps and more challenging market conditions.
Which is odd: remember how everyone said banks are being punished for low volatility? Apparently the only thing worse for banks than zero/low vol was... high vol.
The sharp spike in UST volatility in mid-Oct as well as selloff in both credit & energy made for a more challenging backdrop.... Although a sharp spike in correlation and volatility drove a more challenging environment in equity derivatives, higher customer activity is likely to have made for performance consistent with prior quarters.... Although 4Q14 had its specific challenges, we believe that diverging central bank cycles are driving higher levels of volatility and customer activity.
And yet, if and when the time comes for another bank to be Lehmaned, which it shortly will as there is simply too much competition for financial services and declining demand, in a centrally-planned world, one can be sure that neither JPM, nor GS nor BAC or MS will be sacrificed.