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Investment banks' revenue rise 9% in first quarter: survey

[LONDON] Revenue at the world's 10 largest investment banks rose 9 per cent to US$44.9 billion in the first quarter compared to a year ago, as financial market volatility and central bank stimulus measures boosted profits, a survey showed on Wednesday.

Trading in fixed income, currencies and commodities (FICC) divisions, which are particularly exposed to economic conditions, were the outperformers, up 5 per cent on a constant dollar basis to US$22.5 billion, compared with US$22.1 billion a year earlier, data from industry analytics firm Coalition shows.

Revenues from FICC have slumped in recent years on the back of tougher regulations and low market volatility, that has prompted investment banks to reshape themselves, shedding staff and exiting certain business lines.

Since 2009, revenues in FICC, which make up about half of investment banks' revenues, have declined by about 50 per cent at the top 10 investment banks globally, data from Coalition shows.

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A pickup in activity has so far not translated into a pick-up in hiring. Across all the investment banks tracked by Coalition, which include Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs , JPMorgan, Morgan Stanley and UBS, headcount dipped 4 per cent. Since 2011, headcount has fallen by around 20 per cent.

After a normal April, May is proving to be relatively weak for revenue from FICC that could continue into June and see revenues in that division slump 25 per cent, JPMorgan analysts said on Tuesday. The first quarter is typically the strongest for investment banks as cash is put to work.

Revenue from banks' equity businesses were another bright spot, rising 20 per cent on a constant dollar basis to US$12.5 billion, compared to US$10.8 billion a year earlier, driven by robust volumes and a rebound in market sentiment.

Investment banking divisions, which advise on mergers and acquisitions (M&A) and equity and debt underwriting saw a 5 per cent increase in revenues to US$9.8 billion in the first quarter, as dealmaking activity and a surge in cross-border deal volumes drove strong profits.

Debt capital markets activity, however, declined 14 per cent as revenues from leverage loan issuance decreased significantly, particularly in the Americas.