US investment banking makes a comeback

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US investment banking makes a comeback
Third-quarter results last week from the trading and advisory units of JPMorgan Chase and Citigroup, two of the top three banks by investment-banking revenues, suggest that more good news is likely from Goldman Sachs and Morgan Stanley, which report on Tuesday and Wednesday this week.

At JPMorgan, revenues from the corporate and investment banking unit were a record $9.5bn, boosted in particular by vibrant fixed-income markets after the Brexit vote and plenty of action in currencies. Citi, too, had a bumper quarter in bond trading, with revenues from that division up more than a third from a year earlier to $3.5bn.

For Jamie Dimon of JPMorgan and Mike Corbat of Citi, it is a measure of vindication. As second-tier banks such as UBS, Credit Suisse and Deutsche have made cuts in investment banking, beaten back in many cases by investors demanding much higher returns, the big US banks have gritted their teeth, preserving much of their staffing and infrastructure while assuring shareholders that better numbers were just around the corner.

That stance has been challenged. Executives at Goldman Sachs were taken to task by analysts in July, after four quarters in a row of subpar returns. Earlier this year the bank trimmed about 10 per cent of its staff in fixed-income sales and trading, a much bigger cull than the usual bottom 5 per cent each year, and is currently cutting about 30 per cent of its investment bankers based in Asia.

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