Regulatory uncertainty hits US banks’ Q2 results

Goldman Sachs' net revenues in fixed income, currencies and commodities (FICC) were $4.40 billion, 35% lower than Q2, 2009 and 40% lower than Q1, 2010. "During the second quarter of 2010, FICC operated in a challenging environment characterised by lower activity levels and wider corporate credit spreads," the bank said. "The decline in net revenues compared with the second quarter 2009 reflected significantly lower results in credit products, interest rate products and currencies."

Bank of America Merrill Lynch saw Q2 FICC sales and trading revenues of $2.32 billion, holding steady from $2.68 billion in Q2, 2009 but a 58% decrease from Q1, 2010. The banks attributed the decrease to "significant spread widening coupled with uncertainty in the markets, which led to a decline in liquidity and customer appetite for risk". It also highlighted a reduction in secondary trading, due to investor concerns over the European debt crisis and regulatory change.

JP Morgan, which does not break down its foreign exchange figures, saw overall fixed-income market revenues drop to $3.56 billion, a 28% decrease from Q2, 2009, when it made $4.93 billion, and a 35% decrease from $5.46 billion in the first quarter this year.

Meanwhile, Citi reported fixed-income revenues, which include FX, of $3.71 billion, a decrease of 33% from Q2, 2009 and a 40% decrease from Q1, 2010. However, it said its FX revenue was higher than Q1, but declined to provide figures. "Everyone was down significantly both quarter-on-quarter and year-on-year," a spokesperson said.

Morgan Stanley bucked the trend with an uplifting Q2 for fixed-income sales and trading net revenues, which include FX, at $2.30 billion, a 160% increase from Q2, 2009 but a 14% decrease from Q1, 2010.

State Street also reported positive FX trading revenues of $141 million for Q2, an 18% increase from Q2, 2009 and a 31% increase from Q1, 2010. A spokesperson said the increase was "due to volatility and volume".

Bank of New York Mellon's FX trading activities totalled $244 million, holding steady from $240 million in Q2, 2009 and increasing 39% from Q1, 2010. The bank attributed the increase to increased volatility.

JP Morgan and Morgan Stanley declined to comment on results beyond their press statements.