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Wall Street Banks Warn Their Trading Boom Is Over

The Wall Street boom is petering out at U.S. banks.

For much of 2020 and through the first quarter of this year, the biggest U.S. banks posted blockbuster results from trading stocks and bonds and advising companies on deals. The Federal Reserve flooded the market with money, companies raced to sell new debt and go public, and traders on Reddit and from big institutions moved those securities quickly. Banks at the middle of all of those transactions reaped the rewards.

Now, executives are warning that their market revenue is tumbling, at least compared with the past year.

JPMorgan


JPM -0.17%

Chase & Co. Chief Executive

Jamie Dimon

said at a financial conference this week that his firm’s trading revenue, both fixed-income and equities, would be north of $6 billion in the second quarter. That would be down some 38% from the year-ago period, when the bank made a record $9.7 billion.

“Still pretty good,” is how Mr. Dimon described it. Indeed, $6 billion would have been near a quarterly record at any time before 2020.

Citigroup Inc.


C -3.60%

Chief Financial Officer

Mark Mason

warned second-quarter trading revenue will be down about 30% from the prior year, with a drop-off in fixed-income trading.

Bank executives have warned in recent quarters that their substantial gains didn’t seem sustainable.

Morgan Stanley


MS -0.39%

CEO

James Gorman

said this week that revenue from fixed-income trading would slip, but that it appeared things were normalizing.

“Obviously, it won’t be where we were in the first quarter, which was gangbusters, or a year ago,” Mr. Gorman said. “They were the two best quarters by far in our history, but certainly not a bad quarter and some really encouraging signs.”

Messrs. Gorman and Dimon both said deal-making revenue could remain strong for the quarter.

The figures, while arguably bleak, aren’t worse than analysts had expected. Revenue for Wall Street banks is widely forecast to fall this quarter.

Bank shares are underperforming this month after a record pace to start the year. The KBW Nasdaq Bank Index is down about 6% in June, while the S&P 500 is up around 1%. The banks are still up 28% for the year, more than double the S&P 500’s 13% gain.

Citigroup shares slid about 4% to $70.85 on Wednesday morning and have lost 10% this month. JPMorgan was down 1% to $153.62 and has lost about 6% in June. Morgan Stanley and

Goldman Sachs Group Inc.


GS -0.57%

were down about 1% Wednesday morning and for the month.

When the coronavirus tore through industry, commerce and society in March 2020, the U.S. economy came to a screeching halt. Top executives relive the tough decisions they made as they scrambled to weather the storm. Photo Illustration: Adele Morgan/The Wall Street Journal

Write to David Benoit at david.benoit@wsj.com

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