It's the time of year when US banks file 10k reports with the SEC for 2011. Buried within these reports is information showing how well each bank's trading business performed, and the frequency distribution of gains and losses over the 12 month period.
Based upon this distribution, it's possible to extrapolate the trading culture at each bank. Despite not being mandated to come up with such information by the SEC, RBS produces something similar too.
These are our conclusions:
As we've said before, JPMorgan has emerged as the definitive bank to work for (unless you're in EMEA equity derivatives or capital markets). This applies equally if you're a trader. The bank's trading businesses had only 28 loss making days in 2011 - far fewer than anywhere else we've looked at. It also had an abnormally large number of highly profitable days, with 59 in which trading gains exceeded $120m, and 107 in which revenues exceeded $90m. As the graph below notes, average daily trading revenues at JPMorgan were $75m in 2011. No other bank breaks this figure out, but we suspect it's a lot higher than elsewhere.
Overall, the picture of trading at JPMorgan is of a business that takes big, but careful risks - which pay off.
Goldman Sachs' trading business has traditionally been seen as the best. This is now questionable when it's juxtaposed with JPMorgan's.
Goldman had 54 days of losses last year - more than any of the other banks we're looking at. However, its results were also unusually skewed in favour of very profitable trading days: it made net revenues of more than $100m on 54 days. Only JPMorgan had a similar distribution, but JPMorgan made fewer losses.
Overall, therefore, the picture of trading at Goldman Sachs is of a business which takes big risks and makes big profits, but also gets it wrong more often than its rivals.
Compared to Goldman and JPMorgan, Morgan Stanley's trading business is far less effective at generating highly profitable trading days, and yet still quite likely to make a loss.
Hence, Morgan Stanley had 13 days in which it made more than $100m, but 49 in which it made a loss.
The picture is of a trading business that generally plays it safe, and yet still gets it wrong fairly frequently.
Citigroup's trading business is a curiosity. Sitting between Morgan Stanley and Goldman Sachs, it had a lot of loss making days, counterbalanced with quite a few days in which it made more than $100m. At the same time, however, it had several days in which both losses and gains were off the scale.
Hence, Citi's trading business had around 50 loss making days in 2011, and around 39 days in which it made more than $10m. However, it also had one day when it made a massive loss of $260m-$280m and two days in which it made a massive gain of $280-$300m
The picture is of a trading business that is aggressive, takes risks and makes good gains, but which seems a loose cannon and a little out of control at the margins.
The trading picture at RBS is predictably bleak. Here is a business that has a lot of loss making days, but very few days of serious gains.
Hence, there were 42 loss making days at RBS last year (vs. 21 in 2010), but only 6 days in which trading revenues exceeded £60m ($100m).
The picture is of a trading business that is highly constrained in its ability to take risks and make big money, but which nevertheless makes quite heavy losses.