J.P. Morgan's London-based banking analysts. led by top-ranked analyst Kian Abouhossein just issued their predictions for banks' revenues in 2018. If they're right, this isn't going to be a blowout year - but nor is it going to be that bad either.
Needless to say, some banks and some divisions within those banks are expected to fare better than others. Here's the short version of their forecasts..
Within FICC, macro (rates and FX) traders are expected to see the biggest uplift. This is partly the result of macro traders' weak 2017, but rising revenues should at least justify last year's rush of macro hiring.
By comparison, J.P.M is predicting that credit trading revenues will fall in 2018.
While cash equities revenues stand to be impacted by the partially delayed MiFID II regulations, J.P.M's analysts are predicting a pickup in equity derivatives revenues as volatility rises. This should help equities divisions at Credit Suisse and Deutsche Bank.
If you want to join a European bank, you might want to make it Credit Suisse. J.P. Morgan's analysts have Credit Suisse stock as their top European investment banking pick. Following last November's Credit Suisse investor day, they say the Swiss bank offers a combination of lower costs and improvements in the strategic resolution unit housing the bank's toxic assets.
Of course, lower costs aren't necessarily good news for employees - particularly if you work in compliance and control, where CS plans to slash staff.
Lastly, J.P. Morgan's banking analysts are big believers in Goldman Sachs.
Following co-COO Harvey Schwartz' presentation of Goldman's turnaround strategy in September 2017, the analysts think things are looking up at the rival bank. "We believe GS has a bottom-up strategy to capture some of the FICC opportunities and [that] management is very committed to delivery," they write. Markets should be kinder to Goldman too: rising volatility is expected to flatter the firm's revenues in 2018. So too is a turnaround in the commodities business and, "ongoing best-in-class cost management."
If Goldman and Credit Suisse are looking good for 2018, Deutsche Bank remains a wild card. J.P.M's analysts note that the bank has a limited track record of generating positive operating leverage and that it's return on equity remains below its cost of equity.
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