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Citigroup (C.N), JPM.N, Goldman Sachs (GS.N) and Bank of America (BAC.N) all reported declines in key fixed income, commodities and exchange rate trading units in the fourth quarter, although overall performance was mostly boosted by improved loan growth and rising net interest margins.
In the last few months of 2018, amid concerns about the global economic slowdown and trade disputes between the United States and China, the Fed's view that interest rates could be raised excessively intensified investors'worries. This has caused turmoil in the stock market, bond market and commodity market. As a result, many investors have withdrawn from the market and the volume of bond transactions has declined, thus impairing the value of assets in the credit market on bank accounts.
"Holding positions on hand has been hit hard, and many bank customers are leaving because it's difficult to make up their minds in uncertain situations," said Jeffery Harte, banking analyst at Sandler O'Neill & Partners.
According to ICE Bank of America Merrill Lynch Index data, corporate bonds, whether investment-grade bonds or high-yielding junk bonds, expanded their credit spreads by the largest margin in more than seven years compared with U.S. government bonds in the fourth quarter.
Moreover, the issuance of corporate bonds has basically dried up, eroding Bank Underwriting fees.
As this week's quarterly report shows, these factors clearly have a serious impact on Wall Street's big banks.
Bank of America said revenue from fixed income business expenses fell by 5%, adjusted sales and trading revenue fell by 6% as bond underwriting and consultancy fees fell, with bond trading revenue falling by 15%. Goldman Sachs's bond trading revenue plunged 18% to $822 million, well below its peak of more than $6 billion.
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