The market chaos could have messed up investment bank earnings for a year

The past few weeks have witnessed an insane amount of market volatility.

Each of the major US stock indexes finished August down more than 6%, their biggest monthly loss since May 2012.

And that turmoil is going to have long-term effects on Wall Street investment banks.

That's according to a note from JPMorgan's Kian Abouhossein, who has cut the bank's earnings-per-share estimates for investment banks across the street by 2-3% from 2015 all the way to 2017.

He argues in his note that while banks are unlikely to have taken short-term trading losses as a result of the moves, the spikes in volatility of the past two weeks are likely to have a lasting impact on business through the rest of this year and next.

The note said:

We note that investment banks are not immune to the market movements & overall positioning may have impacted profit & loss negatively vs. the second quarter leading to earnings per share cuts. We also take a cautious view that recent strong turnover, especially in equities could decline materially once markets settle - not just in Asia but globally. We reiterate our cautious view on credit trading as potential defaults could impact spread levels & client activity. Finally volatility could impact deal completion in 3Q and potentially 4Q

Abouhossein thinks banks that specialise in trading cash equities, foreign exchange and government bonds like UBS and Deutsche Bank are best positioned.

The bank's global investment banking "pecking order" goes like this: UBS, Deutsche Bank, Credit Suisse, Barclays, Societe Generale, Morgan Stanley, BNP, and in last place, Goldman Sachs.

Here's his revised earnings per share estimates, by bank: