Volatility boosts US trading revenue as investment banking lags; Bank CEOs held talks over tariff crisis, sources say

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Volatility boosts US trading revenue as investment banking lags

Wall Street’s largest banks are expected to post their strongest quarterly trading performance in more than a decade, driven by market volatility during the early months of US President Donald Trump’s administration, the Financial Times reported on Tuesday. 

Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America and Citigroup are forecast to report a combined $34.5bn in first-quarter revenues from equities and fixed-income trading, according to estimates from Bloomberg and Visible Alpha. This represents a 10 per cent increase on the same period last year and the highest total since at least 2014.

Market volatility, fuelled by Trump’s sweeping tariff policies, has led to a sharp sell-off in US equities and helped boost trading volumes. However, the same conditions have weighed on investment banking, with mergers and initial public offerings slowing despite earlier optimism for a bumper year of dealmaking from bank executives.

According to the FT, first quarter investment banking revenues at the five largest US banks are projected to rise just 3 per cent to around $7.65bn, much of it from previously announced deals. Meanwhile, new deal activity since January is at its lowest in more than a decade.

Bank CEOs held talks over tariff crisis, sources say

The chief executives of several major global banks, including JPMorgan, Bank of America, Barclays and HSBC, held private discussions on Sunday to assess the mounting economic fallout from US President Donald Trump’s aggressive trade policies. 

According to anonymous sources cited by a Sky News report on Monday, Jamie Dimon of JPMorgan, Brian Moynihan of Bank of America, CS Venkatakrishnan of Barclays and Georges Elhedery of HSBC took part in a call, which was convened to allow US banking leaders to share their views on the current market turmoil with their international peers. 

Sky’s sources said that Sunday’s call was organised by the Bank Policy Institute, a Washington-based financial public policy group.

Global financial markets have been rattled in recent days, with leading bank stocks among the hardest hit. The KBW Bank index, which tracks the performance of leading publicly traded banks in the US, has dropped about 15 per cent since the new tariffs were announced on April 2.

Dimon warned in his annual shareholder letter on Monday of the inflationary and recessionary risks posed by an escalating trade war.

“I am hoping that after negotiations, the long-term effect will have some positive benefits for the United States,” he wrote. “My most serious concern is how this will affect America’s long-term economic alliances.”

BoE governor Bailey will be new FSB chair

Bank of England governor Andrew Bailey has been selected to chair the Financial Stability Board, a global entity that analyses the international financial system and proposes policy suggestions to regulatory authorities to improve global market stability.

Bailey’s appointment comes at a time when the FSB and the global financial sector are closely monitoring the fallout from US President Donald Trump’s tariffs, which have already roiled markets worldwide.

“It is at times like this that the stability of the financial system is put to the test. That stability rests on strong regulatory standards and effective international co-operation,” said Bailey in the FSB’s release on Monday.

Bailey has been chairing the FSB’s Standing Committee on Supervisory and Regulatory Co-operation since October 2021, which focuses on minimising global instability. 

His new role will begin on July 1 and he will undertake his chairmanship alongside his current position as governor of the BoE.

Morgan Stanley downgrades banks’ outlook

Morgan Stanley analysts downgraded their outlook on US large and mid-cap banks from “attractive” to “in-line” on Monday, citing increased recession risks stemming from President Donald Trump’s aggressive tariff policies.

In a note, the bank said its base case now expects a “significant” slowdown in US GDP growth, with the risk of recession increasing. 

The combination of weaker economic activity and heightened uncertainty is expected to delay a recovery in capital markets, reduce loan growth and lead to rising loan losses on consumer and business lending, the bank’s analysts wrote. 

The analysts warned that US consumers, who are central to the country’s economic growth, “do not have savings levels to absorb these tariffs and continue spending at pre-tariff levels”.