JPM/BofA: What’s happening in their Investment Banks?18 April, 2011, 16:15. Posted by BM
Tags: BofA, Financials, Investment Banking, JPM
JP Morgan and Bank of America / Merrill Lynch reported their Q1 earnings last week. For their investment banking arm, investment banking fees are broadly similar to that in 4Q10 while FICC & equities revenues have rebounded from seasonality and return of client activity.
Overall investment banking fees were flat relative to prior quarter. For JPM, the fees came in at $1.8bn, which is down 3% from the prior quarter. Debt underwriting fees came in at $1.0bn (up 6% from prior quarter) while equity fees came in at $0.4bn (down 22%) and advisory fees at $0.4bn (flat). While for BofA/ML, total fees were largely similar to that seen in 4Q10, with $0.8bn debt, $0.4bn equity and $0.3bn advisory. In general, corporates continue to have a lot of cash in hand, which is no doubt a plus for M&A, although the increasing uncertainty regarding the global macro outlook might put some companies off from doing large deals.
Sales and trading revenues in 1Q were substantially higher compared to 4Q10, which is partly due to normal seasonality of client activity. FICC revenues came in at $5.2bn for JPM, jumping up 82% from 4Q10, helped especially by commodities. BofA/ML had $3.6bn for FICC revenues, but that is a third lower than in 1Q10. Equity revenues came in at $1.4bn for JPM, benefiting from strong performance in cash derivatives and prime services. For BofA/ML the equivalent was $1.2bn, which is 18% lower than in 1Q10. Both banks have put more emphasis on their client/flow businesses, while de-emphasizing proprietary business.
Other things we also find interesting:
JPM had US$40bn of equity within the division, which generated an ROE of 24% in the first quarter versus an over-the-cycle target of 17%.
JPM core tier 1 10.0% under Basel I while under Basel III this is estimated to be only 7.3%.