A surge in revenue from fixed-income, currency and commodities (FICC) sales and trading will likely boost first quarter results for Europe’s big financial firms, Fitch Ratings announced on Tuesday.
The rating agency says first quarter (Q1) results for the big European global trading and universal banks’ (GTUBs) — Barclays, BNP Paribas, Credit Suisse Group, Deutsche Bank, HSBC, Société Générale and UBS Group, which start reporting their results this week — will likely benefit from strong increases in FICC revenues.
“We expect revenue from FICC sales and trading to have strengthened in Q1, driven by higher trading volumes linked to volatility in financial markets and changing expectations for interest rates,” Fitch says in a news release. This will contrast with a particularly weak Q1 2016, the rating agency adds, when sales and trading revenue declined by 20% year over year.
Despite the strong Q1, European banks will face earnings pressure this year from low interest rates, which limit returns on their commercial banking and wealth management businesses, Fitch notes.
It also expects some banks to “face further fines and other misconduct charges after last year’s large fines for Credit Suisse and Deutsche Bank related to legacy retail mortgage-backed securities.”