Morning Coffee: Bankers are busy, but bumper bonuses look unlikely. Deutsche Bank is still making big hires
Everything’s fantastic and nobody’s happy. That seems to be the message from the bumper day of Q3 results from Goldman Sachs, Bank of America and Citigroup yesterday. All three big banks beat their earnings estimates, and credit for the beats had to be given fairly and squarely to the investment banking divisions. It would have been reasonable to conclude, as several commentators did, that “Wall Street bonuses have just been salvaged”.
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But by the end of the trading day, the share price gains had been given back – BoA ended the day slightly up, Goldman slightly down and Citi down 5% as concerns grew about the regulatory and systems problems that Anand Selva is meant to be working on. And on the conference calls, CEOs gave some distinctly mixed messages about the near future and, implicitly, the bonus outlook.
The problem appears to be that although both advisory and trading revenues were a lot stronger than expected at the guidance stage – it seems to have been an unusually strong September – they came in ways that are difficult to extrapolate to the fourth quarter, let alone into next year.
On the trading side, FICC (fixed income currencies and commodites) were weak, often due to lower rates revenues, while equities were strong. But the strength in equities appears to have been mainly located in derivatives business, and to have been related to trading desks getting on the right side of the sharp market moves in August and September. Nobody can guarantee that the moves will happen again, or that big banks will be on the right side if they do.
The banking side of the business has similar problems when it comes to forecasting revenue. Jane Fraser of Citi
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