Trading revenue at the money-center banks rebounded after a miserable first quarter, but the second-quarter results still paled in comparison to last year's numbers.
"Last year was an extraordinary year for profits, but the first half of this year has been extraordinarily weak. It reflects the ongoing rolling recession in the bond markets across the globe," said Tanya Azarchs, an analyst at Standard & Poor's Corp.
Benoit Jadoul, vice president of foreign exchange marketing at Chase Manhattan Corp., said volatility in the financial markets made some customers wary of making trades.
"It was a difficult trading environment in the second quarter," he said. "We really didn't have any yardstick to go by. The markets were very fickle. A trending market is easier for a proprietary trader."
BankAmerica Corp. Wednesday reported second-quarter trading profits of $106 million, up from $74 million in the first quarter. B of A had reported trading income of $172 million in the second quarter of 1993.
Citicorp also gained substantially, with earnings of $159 million in the second quarter, up from a dismal $71 million in the first. In the second quarter of 1993, Citicorp reported $572 million in trading income.
Second-quarter trading income at Chemical Banking Corp. rose to $203 million, from $185 million in the first quarter. The bank's second-quarter 1993 trading revenue totaled $298 million.
First Chicago Banking Corp. reported a second-quarter trading profit of $37 million, following a first quarter in which it lost $25 million in trading. In 1993, the bank had second-quarter trading income of $91 million.
Trading revenue slipped further in the quarter for J.P. Morgan & Co. which reported $228 million, compared with $356 million in the first quarter. In the second quarter of 1993, J.P. Morgan had trading profits of $520 million.
Chase Manhattan's second-quarter trading income, while respectable at $151 million, was off from $179 million in the first quarter and from $187 million in the second quarter of 1993.
Sanford C. Bernstein & Co. analyst Ronald I. Mandle attributed the general decline from last year's levels to a combination of rising interest rates and investor wariness.
"It's primarily interest rate related," he said. "The markets did the opposite of what the fundamentals said they should. Plus, there was less customer business in derivatives."
Raphael Soifer, banking analyst at Brown Brothers Harriman & Co., said the results were hardly a surprise.
"Last year, every participant in the market told us that. the trading profits at 1993 levels were not sustainable," he said. "Last year was way above the trend line. The first quarter and so far the second quarter are beginning to look like they are abnormally below the trend line.
"Among U.S. corporates and institutional investors, there is a greater sense of caution," he added, pointing to the publicity surrounding derivatives losses by Procter & Gamble and others. No one wants to be the next P&G in the newspapers."