JPMorgan Chase & Co, one of the oldest and world’s biggest investment banks, is considering shrinking some of its trading businesses as it expects new rules and regulations to make these businesses less profitable.
Such a decision does not mean that JPMorgan quits some of its capital-intensive units such as interest-rates trading and prime brokerage, as Daniel Pinto, chief executive officer of JPMorgan's corporate and investment bank, states. However, he does not rule out lay-offs.
Meanwhile, other large global investment banks have scaled back fixed-income trading in the context of new regulations imposed by G20 Financial Stability Board. In December, the Board proposed that banks will need to hold an extra capital cushion and said the firms will need more equity if they rely on risky types of debt.
“Our scale gives us leading positions across these businesses even as others pull back,” said Daniel Pinto. “But there are always ways to streamline things and be more efficient.”
JPMorgan generated $4 billion more revenue from investment banking and trading than its next-closest competitor last year, producing $25.3 billion. Yet profitability slid, with return on equity dropping to 10% from 15% a year earlier as the unit required more capital.
