To close out last week we highlighted the U.S. banks should report strong trading activity on the back of volatile markets and high volumes. JPMorgan and Morgan Stanley confirmed this view, reporting record equities trading revenue (45%+ Y/Y).
While it shouldn’t be long-lived, a strong trading backdrop should favour some Canadian banks more than others…
… and with Trump at the helm volatility could be the new normal, giving the strength out of this segment more staying power.
Management highlighted uncertainty as the new normal as well, supporting additional provisioning and a softer growth outlook, given strategic investments have been put on hold until the dust settles on trade.
… that shifts their focus away from more strategic priorities with obvious implications for the investment banking pipeline outlook towards more short-term work, optimizing supply chains and trying to figure out how they’re going to respond to the current environment.
We saw Canadian banks do the same thing in Q1, taking additional provisions to reflect a more cautious credit outlook…
… and like their U.S. counterparts, the Big-6 have adequate capital buffers to absorb any near-term shock.
We’ve gotten enough out of the U.S. banks to be confident in the read-through but we should get another data point tomorrow, with Goldman Sachs reporting before the open.
