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Fallout from the Covid-19 outbreak may be hammering economic growth and throwing financial markets into turmoil, but the spike in volatility has been good for Wall Street trading desks.

According to a new report from DBRS Inc., the big five U.S. investment banks — JPMorgan Chase & Co., Goldman Sachs Group, Morgan Stanley, Bank of America Corp., and Citigroup, Inc. — enjoyed very strong results in their capital markets businesses in the first quarter.

On average, capital markets revenues were up by about 30% from the same quarter a year ago, it reported.

“Results were driven by a substantial increase in trading revenue across both fixed income and equities, as total quarterly sales and trading net revenues reached their highest level in nearly a decade,” it said.

The strong trading results came partly due to a surge in financial market volatility in March, DBRS noted.

“While the sustainability of these strong results is uncertain,” DBRS said that it views the U.S. banks’ ability to adjust to changing market conditions and to meet increased client demand favourably, despite the unprecedented conditions.

Additionally, investment banking fees were up by 4% year over year, it noted, “with investment grade bond issuance reaching record levels, especially in March, as companies tapped the capital markets to raise additional liquidity.”

“JPMorgan and Bank of America were the biggest beneficiaries of the surge in activity,” it said.

At the same time however, the high yield market was “effectively closed,” DBRS said.

The strong results in the capital markets business “provided a significant offset” to the firms’ much weaker results in other parts of their businesses, DBRS said, “demonstrating the benefits of a diversified business model, despite their accompanying bouts of revenue volatility.”

Indeed, in its own report, Moody’s Investors Service said that the total pre-tax profits for the big five came in at US$14.3 billion in the first quarter, down 55% from the same quarter in 2019.

The drop in profits came as the strong trading results were accompanied by “sharply higher loan provisions, markdowns on assets and commitments, elevated loan drawdowns, deposit inflows and negative pressure on capital ratios and net interest margins,” it noted.

Nevertheless, Moody’s said that the firms entered the downturn with “prudent amounts of liquidity and capital and solid pre-tax pre-provision profitability that will help safeguard their financial profiles from many adverse scenarios.”

As the pandemic continues to play out, Moody’s said that the firms “will need to delicately balance earnings pressure, customer forbearance and support for the economy while maintaining capital and liquidity strength.”