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Forget Jes Staley’s prediction that market revenues will be down 30% in Q3 – he said something far worse

Jes Staley, CEO of JPMorgan’s investment bank made a short presentation at the Barclays Global Financial Conference this afternoon.

Much is being made of the fact that Jes said Q3 markets revenues will be down 30% quarter on quarter at current run rates.

This is certainly bad. But it’s not disastrous. Markets revenues always fall in the third quarter, even in good years. A 30% quarter-on-quarter drop in Q3 markets revenues at JPMorgan implies a year-on-year reduction of 9%. That’s not so dreadful.

What’s happening to investment banking revenues is much worse.

In the third quarter, Staley said investment banking revenues could be plus or minus $1bn. If revenues come in around the $1bn level, this implies a reduction of 48% from the second quarter and a reduction of 33% year on year.

This is a significant. Investment banking revenues held up well in the first half of 2011. Banks will have been hoping this would remain the case in the second half: robust revenues in capital markets and M&A would have cushioned the blow from collapsing sales and trading revenues. Suddenly, this isn’t happening. Redundancies could be a lot higher as a result.

Comments (4)

  1. They should have hired me to avoid this situation.

  2. Last paragraph, first sentence, should read “This is significant” without the article “a”.

  3. @The Banker, you’re god damned right dawg. I’m p1ssed with Jes for this oversight and will forbid his use of the executive washrooms and elevator poste haste. Give me a call and let’s get you in.

  4. The age of investment banking is over. The govts will no longer condone high levels of risk taking and are making capital requirements go higher and higher in a 2 pronged attack on riskiness in the banking sector. This means the 2001-2007 boom in headcount has several years of deflation ahead of it. Enjoy those last hurrah high salaries and plan ahead for a change of career.

    Investment Banking Pragmatist Reply

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