Wall Street's New Year's hangover carried throughout most of the first quarter, and now investment banks are looking at ugly earnings results after volatility stalled dealmaking to begin 2016.
Accordingly, earnings projections across big banks have been dialed back. Each of the major Wall Street banks are facing lower estimates for the first quarter of 2016 than what they reported the prior year. Goldman Sachs' consensus estimates are for earnings of $3.49 a share; Morgan Stanley's is 65 cents a share; and JPMorgan Chase is $1.27 a share.
Global investment banking businesses suffered the slowest first quarter since 2009, according to financial services data firm Dealogic. The nearly $750 billion in global mergers and acquisitions represented a volume plunge of 20 percent year over year, Dealogic reported Monday. Banking revenue was hit by a combination of a slow start to the year's M&A, weak high-yield debt issuance and lingering weakness in banks' trading operations, analysts said.
To make matters worse, trading desk revenue has been shrinking at many top banks. Last year, Morgan Stanley revealed plans to reduce head count in its fixed income, currency and commodities trading operation as part of a broader plan to streamline operations and generate savings. Though the bank's stock has rebounded from early February lows, the shares are still down about 20 percent on the year. Morgan Stanley representatives declined to comment.
"We've seen material cutbacks in staff for fixed income," said Kenneth Leon, global research director with S&P Global Market Intelligence. "This appears to be more secular than cyclical."