We've Been Asking Bankers - 'What's The Saddest Bank On Wall Street Right Now?'
But the promises were kept. Only recently has the market started eeking out those once familiar 'all-time highs' again after a whipsaw winter, and it's too late. Jamie Dimon says JP Morgan is going to help save Detroit, but who's going to save banks from falling trading revenues? Everyone is expecting a decline from this time last year, and that could mean the L-word - layoffs.
Add to that the fact that the Feds are charging banks criminally now - Credit Suite admitted guilt and agreed to pay a $2.6 billion fine last week. Regulators haven't done anything like this in a decade for fear that it would mean the end of days. It doesn't, now Wall Street's bracing itself for more.
So since the consensus is that The Street is in a funk, we decided to try to find the bank in the deepest funk. It was impossible.
"That's like asking 'what's the bagel-iest bagel?'," said one banker at a bulge bracket firm. "They're all bagels."
We'd say which firm, but who cares - it's a bagel (and he requested anonymity).
The Securities Industry and Financial Markets Association reported that bond trading volume has fallen 13.2% from Q1 2013. Volume hasn't been this light since 2002. That is why Citigroup CFO John Gerspach said that revenue from trading fixed income, currencies, commodities and stocks could fall between 20% and 25% at a conference this week.
The biggest investment bank in the world, JP Morgan, said the same thing in a memo earlier this month. More than any other bank since the crisis, JPM has lost its shine. Once the darling of the Obama administration in 2008, too many lawsuits and one Whale of a $6 billion trading loss have made the bank just as dirty as everyone else on The Street. Morale is low.
Now, this story isn't just about a stock market slump - the S&P has slowly marched up only 4% year-to-date - it's about regulation, and the almighty search for yield. Both are at play here to the detriment of Wall Street banks.
Right now, investors are finding yield in securitized products, especially riskier junk bonds. These products are less liquid than equities and other asset classes. They're not traded on an open market like the NYSE. Traders have to go looking for this stuff when they want it, and the stuff's harder to unload when traders don't want it anymore.
That in and of itself has its problems.
On the other hand, from an investor's perspective, this risky debt has returned 145% since 2008, is up 45% this year, and yields an average of about 6%. That means it's the place to be.
There's another problem with this on today's Wall Street. It's that some banks simply can't do it. Post-crisis regulation requires banks to hold more cash and less risk, but that makes it harder to hold the assets necessary to trade securities like collateralized debt obligations (CDOs) and mortgage-backed securities (MBS).
And if you can't hold them, you can't really trade them. That's how the business works in this illiquid market, and that's why RBS, for example, is getting rid of most of its MBS desk.
It's also why no one is safe.