Bloomberg

(Bloomberg) -- U.S. investment banks extended their trading advantage over European rivals in the first quarter, and have now snatched almost 10 percentage points of market share since 2006, according to Citigroup Inc.

American investment banks account for 54.8 percent of trading in global fixed income, currencies and commodities, or FICC, compared with 44 percent for Europeans, Citigroup analysts said in a report Friday, based . That’s up from 52.1 percent last year and 45.3 percent a decade ago. While U.S. firms’ FICC revenue fell 23 percent and equities dropped 14 percent in the quarter, European banks did worse, with comparable trading income down 28 percent and 30 percent respectively.

American banks benefit “from the superior size and depth of the U.S. capital markets,” while an increased focus on leverage ratios forced Europeans “to withdraw balance sheet,” Citigroup analyst Ronit Ghose said. “The top five players are gaining market share as smaller players retrench to their core geographies. We expect this consolidation process to continue, as second-tier global and regional franchises rationalize.”

Traders at investment banks the world over had the worst start to a year since the height of the financial crisis in 2009 as depressed commodity prices and fears over global growth drove customers to wait out the turmoil. However, backed by a healthier economy, U.S. banks have been able to take relative advantage of European firms that were slower to restructure and are now cutting tens of thousands of jobs as regulators step up scrutiny of riskier activities.

Barclays Plc was the only bank to buck the trend in the quarter, outperforming American rivals on stronger FICC and primary revenues, Citigroup said. Chief Executive Officer Jes Staley, who has repeatedly rebuffed calls to spin off Barclays’s investment bank, was given a boost as income from the firm’s markets business dropped only 4 percent, bolstered by a 46 percent jump in credit trading.

Barclays has still lost ground over a decade. Barclays’s FICC market share was 6.4 percent in the first quarter, down from 10.4 percent in 2006, while Royal Bank of Scotland Group Plc suffered the worst decline over that time horizon, down to a 2.2 percent share from 11 percent a decade ago.

By contrast, JPMorgan Chase & Co., the world’s biggest bond trader, has grown its FICC market share to 15.4 percent from 8.9 percent in 2006, and Bank of America Corp., the second-largest, has expanded to 11.3 percent from 8.9 percent, Citi said. HSBC Holdings Plc, Europe’s largest bank, added more than 3 percentage points in market share to become the fifth-largest global trader, the analysts said.

Credit Suisse Group AG and Deutsche Bank AG fared the worst at the start of this year, due to “ongoing restructuring and resultant pullback from key products,” while UBS Group AG had a “tough comparison” to the first quarter of last year, the Citigroup analysts said. All three banks have cut thousands of investment banking jobs, closed risky trading units and exited countries to cut costs and revive profitability. 

In the first quarter, Credit Suisse saw the most drastic decline in FICC market share, dropping to 2.6 percent from 5.7 percent for all of 2015. Deutsche Bank held steady at 11.3 percent and UBS retreated to 2.4 percent from 2.5 percent.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net. To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Keith Campbell, Jon Menon

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