Banks are poised to report substantial trading revenues in the first quarter of 2025, driven by a volatile market that has sparked increased investor activity. According to BCG Expand, a research and data provider owned by Boston Consulting Group, the total revenue pool for global markets is expected to expand at an annual rate of 7% to 9%. This growth could result in the five largest U.S. investment banks generating approximately US$34 billion in trading revenues, marking one of their highest totals for the first quarter.

BCG Expand forecasts a rise of around 25% in equities revenues, while revenues from fixed-income, currencies, and commodities are projected to remain relatively flat. This stagnation is attributed to declines in credit trading and securitization, which are offsetting better performances in foreign exchange and interest rate-related trading products. Amrit Shahani, a partner at BCG Expand, noted that the volatile trading environment has significantly boosted global markets revenues for banks.

The strong performance in trading contrasts sharply with the underwhelming results from banks’ underwriting and advisory sectors. While these institutions have thrived, some of their largest institutional clients, such as Citadel and Millennium Management, faced difficulties, reportedly losing money in February and early March due to increased market volatility.

In response to the shifting market dynamics, banks have been focusing more on facilitating client transactions rather than making large speculative bets. This strategy has allowed them to flourish as investors adapt to significant changes in the financial landscape, influenced by factors such as China’s DeepSeek AI model and U.S. tariff plans. A senior trading executive from a leading investment bank highlighted that the current environment is favorable for sales and trading due to the volatility prompting portfolio rebalancing among investors.

Equities trading desks have particularly benefited, as investors reevaluate their positions regarding U.S. market performance. The S&P 500 has declined over 9% since mid-February, while the Stoxx Europe 600 has seen a 7% increase this year. The executive also remarked on the robust equity narrative, noting a significant shift in trading focus from the U.S. to international markets.

Banks’ trading units have taken advantage of increased volatility that has persisted since the COVID-19 outbreak in 2020. Last year, the five largest U.S. banks generated US$116 billion in market revenues, a 50% increase from 2019. Although fixed-income trading remains more lucrative than equities, it is the equities sector that has been a key driver of revenue growth.

BCG Expand reported that the total industry pool for equities revenues reached a record US$84 billion in 2024, spurred by strong demand for structured products and heightened client activity linked to the U.S. elections. Prime brokerage services, where banks lend to hedge funds, have also seen significant growth, with Goldman Sachs reporting record revenues in both equities and fixed income, currencies, and commodities (FICC) in 2024.

Despite the different trading themes emerging this year, bank executives remain optimistic about profitability. Mark Mason, Citigroup’s chief financial officer, indicated that the bank’s market revenues are likely to increase by “mid-single digits” in the first quarter. Additionally, Jennifer Piepszak, JP Morgan’s chief operating officer, noted that trading revenues are expected to rise by “low double digits” in percentage terms during the same period.

Source: IFR