With the big Wall Street banks set to start reporting their fourth quarter earnings, Moody’s Ratings says that it expects overall improvements to the banks’ bottom lines.
In a new report, the rating agency is forecasting stronger fourth quarter results for the U.S.-based global banks — which are slated to begin releasing their results on Jan. 13 — compared with the same quarter a year ago.
Moody’s said it’s expecting “solid improvements in debt underwriting and equities trading revenue, slightly weaker equity underwriting and advisory revenue, and stable fixed income, currencies and commodities (FICC) trading revenue,” for the fourth quarter.
Wall Street investment banking was a mixed bag in the fourth quarter, it said, with bond issuance rising, while equity underwriting and merger activity was less buoyant.
Debt issuance volumes were higher in the final quarter, “led by investment grade and high-yield bonds,” it said.
On the equity side, secondary offerings were down in the quarter, but initial public offerings (IPOs) were “up significantly” from a year ago, it noted.
As for merger and acquisition activity, while the number of transactions were down bit from the previous year, the value of those deals was higher, Moody’s said.
In terms of the banks’ trading arms, revenues are seen rising on the strength of higher volumes and wider bid/ask spreads — particularly for equities — Moody’s said, as trading volumes hit record levels for both cash and equity derivatives, and trading spreads rose too, compared to the final quarter of 2024.
Additionally, trading volumes in major fixed-income instruments “were robust” in the fourth quarter, it said, with volumes, “increasing year on year amid strength in structured products, corporate bonds and convertible bonds.”
For FICC futures and options, Moody’s also noted that volumes were “slightly stronger” this year, compared with last year; and the trading in prominent credit ETFs were also higher year on year.
“The strength in credit ETF volume was mostly driven by the investment grade and high-yield bond ETFs, whereas the leveraged loan ETF was weaker,” it noted.