Morgan Stanley's banking analysts have put a new note out this morning. It underscores the antithetical conditions facing investment banking division (IBD) professionals and markets professionals. In short, now is a good time to work in IBD, but a bad time to work in sales and trading. It's an even worse time to work in fixed income currencies and commodities (FICC) sales and trading. And it's a hellish time to have anything to do with FX.
Morgan Stanley analysts think global IBD revenues will be up 39% year-on-year in the second quarter of 2014, led up by M&A (up a gigantic 127%) and DCM (up 24%). Globally, ECM is less hot (down 9%). ECM looks good, however, compared to FICC, where the analysts think revenues will plummet again, by 20% year-on-year in the second quarter. In FX, they think revenues will be down a cataclysmic 48%. Cash equities businesses are faring better in Europe (European volumes are up 20%, although US volumes are down 6%), but equity derivatives are not having a good first half - global volumes are down another 5-15% in the second quarter.
All-in-all, Morgan Stanley's analysts think this leaves European investment banks positioned as per the charts below for full year 2014 and the rest of the second quarter. The FICC businesses of Barclays, RBS, and Deutsche look like very bad news in the short term, with Deutsche picking up over the year as a whole. If you're looking for a growing business, the best place to be in 2014 seems to be BNP Paribas's equities sales and trading business. If you want to hedge your bets in FICC, try HSBC - which as we noted last week, is shielded from poor volumes and low volatility by the fact that most of its business comes from its commercial banking and trade finance customers.