The bankers and traders that are bracing for a rough Q1

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The bankers and traders that are bracing for a rough Q1

With the first quarter in the books, analysts are revising their expectations on how bankers and traders fared during the first three months of the year. In short, most had a difficult Q1.

Analysts from Keefe Bruyette & Woods lowered their estimates for each big U.S. bank, with the exception of Wells Fargo, due to weaker-than-anticipated capital markets and trading activity. They estimated that Morgan Stanley and Goldman Sachs will be taking the brunt of the damage, with Morgan Stanley impacted most by lower markets-related revenues (chart below). Equities and FICC trading revenue are expected to drop roughly 15% year-on-year for the median U.S. bank. As with last year, fixed income traders are expected to fare worse than equities traders.

Elsewhere, equity capital markets (ECM) bankers likely had a worse quarter than any of their colleagues, though the issue appears to be episodic and stronger activity should return. The government shutdown in the U.S. put the brakes on potential initial public offerings, leading to an expected 40% drop in ECM revenues for the first quarter, according to the report. Debt capital markets (DCM) revenues are expected to remain relatively flat (-1%).

Meanwhile, the winners of the first quarter are likely to be M&A bankers. Advisory revenues for the industry are expected to be up 10% year-on-year. Volumes should be higher in the U.S. than Europe.

 

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