JPMorgan Chase & Co. (JPM:US) and Bank of America Corp. (BAC:US) had perfect trading records in the first quarter, making money every day of the period as Morgan Stanley posted losses in eight sessions and Goldman Sachs Group Inc. in two.
One daily gain at JPMorgan exceeded $200 million as the biggest U.S. bank by assets recovered from last year’s London Whale derivatives loss, the New York-based company said yesterday in a regulatory filing. Bank of America, the second-largest lender, generated more than $25 million of revenue on 97 percent of trading days, compared with 76 percent at Morgan Stanley, the firms said in separate filings. Goldman Sachs, which generated about half its revenue from trading last quarter, said its team made more than $100 million on 17 days.
JPMorgan Chairman and Chief Executive Officer Jamie Dimon, 57, has overhauled risk controls and shuffled top managers ahead of the bank’s annual meeting on May 21, when shareholders decide whether to split his two jobs. The firm hadn’t posted perfect results since the first quarter of 2011, before trader Bruno Iksil built an unmanageable position of credit derivatives that led to more than $6.2 billion in losses last year. He was dubbed the London Whale because his bets were so large.
Bank of America posted the unblemished quarter after reining in value-at-risk, or VaR, an estimate of potential trading losses, according to the Charlotte, North Carolina-based company’s quarterly filing.
“If you look at our VaR, and our risk-taking, we’re keeping it balanced relative to the rest of the company,” CEO Brian T. Moynihan, 53, said in an April 17 conference call.
While Bank of America avoided losses, its trading revenue slumped 20 percent, a drop surpassed only by Morgan Stanley among the five largest Wall Street banks. The decline at New York-based Morgan Stanley was driven by a 42 percent slide in fixed-income and commodities trading, excluding accounting charges tied to the firm’s own debt.
Morgan Stanley CEO James Gorman, 54, announced plans in January to cut the amount of capital used by the fixed-income trading business as he seeks to double return on equity (MS:US) even without improvement in markets. The bank said last month it already reached its asset-reduction target for the end of 2013.
The fixed-income business suffered amid lower commodities revenue in the first quarter, Chief Financial Officer Ruth Porat said last month. Revenue also fell in interest rates, while credit and foreign-exchange trading were strong, she said.
Morgan Stanley (MS:US)’s trading revenue declined 32 percent in the first quarter from a year earlier. None of its daily losses exceeded the firm’s value-at-risk.
Goldman Sachs generated $5.22 billion from its trading division in the first quarter of 2013, excluding accounting charges, a 12 percent decline from the year-earlier period. About $230 million of that revenue came from a reinsurance business the firm sold a majority stake in this month.
Clients were “more active really in the first month of the quarter and then it slowed down a bit in March,” Chief Financial Officer Harvey Schwartz said last month. “As issues started to come back more on to front screens as it relates to issues in Europe, clients obviously pulled back toward the end of the quarter.”
Trading revenue fell 5.4 percent at JPMorgan and 12 percent at Goldman Sachs. Citigroup Inc. (C:US), which had a 4.4 percent decrease in trading revenue, doesn’t disclose money-losing days.
Wells Fargo & Co. (WFC:US), which relies least on trading among the largest U.S. banks, had at least four days of negative revenue from those operations during the first quarter, the San Francisco-based company said yesterday in a filing.
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