Breakingviews: Citi leads Wall Street trading-floor opportunists

The coronavirus is self-evidently bad for most people and businesses. But the chaos along the way is good for those who make money from volatile markets. That includes the trading floors of Wall Street’s biggest banks. Their gains help cushion – a bit – the big charges they are taking against expected bad debts.

Citigroup leads the pack of market opportunists. The bank run by Mike Corbat on Wednesday reported a 39% jump in stock and bond trading revenue in the first three months of 2020, its biggest increase in eight years. It hasn’t had a stronger quarter for equities in 10 years.

Goldman Sachs, JPMorgan and Bank of America all saw the trading top line surge 20% or more. Moreover, it’s only the second quarter in a decade in which all four banks reported higher revenue in both equities and fixed income, according to data from filings compiled by Breakingviews.

Then again, it would be surprising if their trading desks hadn’t done unusually well. The new coronavirus and competing oil producers created the kind of ructions in markets that help traders thrive. Stock markets experienced unprecedented plunges. Swings measured by the CBOE Market Volatility Index in mid-March reached a level not seen since the financial crisis. Oil prices hit a near 20-year low and then saw their biggest one-day rise on record. And 10-year Treasury yields hit a record low.

If Wall Street’s traders had missed out, they would be kicking themselves. For most banks, though, these spoils didn’t even touch the sides. Bank of America, Citi and JPMorgan all took provisions against likely bad loans that exceeded their trading revenue. Goldman, which is fairly new to traditional lending, was an exception. Boss David Solomon has said he wants to reduce the extent to which volatile market revenue dominates the group, but in the first quarter trading provided 59% of Goldman’s top line – a level not seen in years.

The reality of a tanking economy and worsening credit will soon make that bright spot just a memory. That is, at least until the next bout of volatility, when the coronavirus eases – or returns.

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