The top 12 global investment banks continued to reap the benefits of market volatility and client activity, posting their highest combined first-half revenue in a decade, according to Coalition Greenwich's latest sector index.

Despite a continued normalization of trading in fixed income, currencies and commodities, or FICC, over the first six months of 2021, total investment banking revenue surged 10% year over year to $115.3 billion, according to the data. However, the slowdown in FICC will likely weigh on the banks' full-year 2021 performance.

Coalition Greenwich, an S&P Global Inc. research company, tracks the investment banking revenue data of Bank of America Corp., Citigroup Inc., The Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Barclays PLC, BNP Paribas SA, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, Société Générale SA and UBS Group AG.

H1 highs & Archegos effect

Excluding the losses linked to the collapse of U.S. family office Archegos Capital earlier this year, first-half equity trading revenue surged 42% to $32.2 billion, reaching its best level in a decade. Another decade high was booked in the 12 banks' investment banking divisions, or IBDs, which combine equity and debt underwriting, M&A deal advisory and origination services. First-half IBD revenue grew 38% year over year to $33.8 billion.

Including the Archegos losses, first-half equity trading revenue was 11% higher than a year ago due mainly to a recovery from the trading losses some of the banks booked a year ago. The French banks bore the brunt of the turmoil created by the pandemic in 2020 as companies canceled dividends, which hit the banks' structured derivative business. The French banks' recovery in the second quarter was a key driver of equities revenue growth in Europe.

Gloomy outlook for FICC

As the year progresses, the weaker FICC results are likely to become a bigger drag on total revenue of the banks in the sample, with the negative effect already visible in the second quarter, when the growth in equities trading and IBD revenue was insufficient to offset the 39% year-over-year drop in FICC.

Over the first half in FICC, revenue generated from trading in G-10 rates, G-10 foreign exchange, credit and emerging markets macro products slowed down, while commodities and securitization products revenue increased. Second-quarter FICC revenue fell due to a decline in flow products trading, the tightening of spreads and lower volatility, Coalition Greenwich said.

This trend continued in the late summer months, according to Michael Turner, head of CIB analytics at Coalition Greenwich. "The third quarter has been materially slower, with lower client volumes, lower volatility and head count turnover," Turner told S&P Global Market Intelligence. The strongest decline has been in FICC, while equities trading results have been more mixed, he said. IBD revenue has remained resilient so far, supported by a strong backlog of M&A deals, Turner added.

Deutsche Bank's investment bank chief, Mark Fedorcik, made similar comments about IBD performance, saying the group has registered "robust activity" in its financing and origination and advisory business in the third quarter.

Head count

Hire-and-fire trends at the banks in the Coalition Greenwich sample have been dynamic over the first six months of 2021, with equity desks losing the most jobs and showing more departures at senior than at middle-management and junior level, Coalition Greenwich said.

Head count cuts in FICC were mainly observed at European banks, while their American peers were looking to hire staff in spread products. Asian FICC trading desks gained some new hires thanks to the banks' investments in China, the research company said.

IBD head count increased slightly, driven mainly by more hiring by the U.S. banks, while recruitment trends at the European banks were mixed.

Coalition Greenwich is a business division of CRISIL, which is part of S&P Global Inc.