Big European, U.S. Investment Bank Reap Trading Benefits Of Volatility In Q1 2025

The largest US and European investment banks experienced significant trading revenue gains in Q1 2025, driven by heightened market volatility stemming from economic and policy uncertainty, particularly surrounding President Trump's new tariffs. Goldman Sachs saw a 26.6% increase in equities income, while Morgan Stanley led US banks with a 45.2% surge; BNP Paribas topped European banks with 42.1% equities growth. UBS reported a record quarter for its global markets division, with combined equities and FICC trading income up 32% to $2.47 billion, and anticipates continued strong performance in Q2 due to ongoing volatility.

Analysis

Major US and European investment banks reported substantial trading revenue growth in the first quarter of 2025, primarily driven by heightened market volatility linked to economic and policy uncertainties, notably the anticipation and announcement of increased US tariffs by President Trump. Within S&P Global Market Intelligence's sample, nine out of ten banks saw increased equities trading income, and all experienced growth in fixed-income, currencies, and commodities (FICC) trading. Morgan Stanley led US banks with a 45.2% year-over-year surge in equities income, while Goldman Sachs reported a 26.6% increase. JPMorgan's FICC income rose 7.8% to $5.85 billion. Among European institutions, BNP Paribas recorded a 42.1% year-over-year growth in equities trading income. UBS Group AG stood out with its global markets division posting a record quarter, achieving a 32% year-over-year increase in combined equities and FICC trading income to $2.47 billion, and leading the sample with a 27% rise in FICC income. This performance was fueled by elevated client activity, portfolio repositioning, and strong results in equity derivatives, particularly in options and high-margin emerging markets. The heightened volatility persisted into the second quarter, with some early April trading volumes at UBS reportedly exceeding pandemic-era peaks by approximately 30%, leading to expectations of continued strong earnings for diversified banks.

Key Decisions for Investors

• Consider overweighting investment banks with strong global markets franchises, particularly those like UBS and Morgan Stanley that demonstrated exceptional Q1 revenue growth driven by market volatility.
• Closely monitor US trade policy developments and other macroeconomic indicators, as sustained or increased market volatility stemming from these factors is a primary driver for trading desk revenues and could impact the earnings outlook for Q2.
• Evaluate banks based on their specific strengths in FICC and equity derivatives, as these segments, fueled by client hedging and portfolio adjustments, were significant contributors to the strong Q1 performance and are expected to remain active.