JPMorgan's third quarter results are out. You can see them here. For the first nine months of this year, revenues at JPMorgan's investment bank are down 7% on last year. Net profits are down 10%. There are some notable disasters: revenues in the Asia Pac investment banking business declined 29% year-on-year in the third quarter (in Europe they were down a mere 11%); advisory and equity capital markets revenues are respectively down by 26% and 25% year-to-date vs. 2011.
There are also some notable successes. While Asia Pac flounders, Latin America seems to have taken up the growth mantle. Revenues at JPMorgan's LatAm investment bank were up a massive 79% year-on-year in the third quarter. This is the only regional market in which JPMorgan has increased its investment banking revenues in 2012. In business terms, DCM looks hot: its revenues rose 62% Q3 on Q3.
There are some interesting observations. JPMorgan has increased value at risk in its fixed income business by 72% in the first nine months of this year vs. 2011. Sounds good? Except fixed income sales and trading revenues have fallen 15% over the same period.
As we observed earlier today, JPMorgan has been slow to make investment banking redundancies, possibly because it didn't add staff as enthusiastically as other banks in 2009 and 2010. However, after adding more than 800 investment bankers in the second quarter of this year, JPMorgan cut more than 600 in the third quarter. Pay per head for investment bankers has been trimmed too. In the first nine months of 2012, JPMorgan's investment bankers have accrued $270k per head, implying they'll earn $358k for the full year. This is down 6% on 2011.
Once again, JPMorgan's commercial bankers are looking comparatively underpaid. As JPMorgan endeavours to encourage investment bankers and commercial bankers to work closely together under the happy all-inclusive 'one bank' umbrella, this could cause problems. JPMorgan's commercial bankers are on track to earn $167k each this year - around half their investment banking colleagues. At the same time, those commercial bankers have generated profits per head of $320k in the first nine months and an ROE of 29%. JPMorgan's far better paid investment bankers have generated profits per head of $200k and an ROE of just 16%.
Investment bankers would undoubtedly argue that theirs is a business of skill and relationships while commercial bankers are simply leveraging off the balance sheet. Commercial bankers might disagree. At worst, theirs in the benchmark which investment banking pay may fall to in the future.
Bank of Nova Scotia will be hiring in prime services. (Bloomberg)
Even if the UK opts out of the financial transaction tax, it may still generate 60% of the revenues. (E&Y
Rothschild has hired a sovereign advisor from Lazard. (Bloomberg)
Are banks really going to start replacing front office bankers with cheaper people from the middle office? Seems unlikely. (Business Insider)
Steve Branton Smith – a ‘veteran head of metals’ at Goldman Sachs, is retiring. (Financial Times)
‘Disintermediation’ is really happening, says E&Y. This should be good for IBD bankers in Europe. (Telegraph)
Another man has sadly committed suicide near Coq d’Argent. (CityAm)
London is now 2nd behind New York in PWC’s list of financial services cities. It used to be 6th. (Bloomberg)
Bruno Iksil has returned to France. France does not extradite its citizens. (DealBook)
Fabrice Tourre is finally going on trial on July 15th. (Bloomberg)
The city of Dublin is wide open to offers from Chinese buyers who want to purchase its banks. (Euromoney)