By Patturaja Murugaboopathy

(Reuters) – Profits at the world’s biggest banks are expected to fall for the first time in seven quarters, dragged down mainly by a slowdown in mergers and acquisitions (M&A) activity and a decline in equity and debt issuance deals.

Refinitiv data shows that the net profit of all top banks worldwide, including global ones, is approximately $1 trillion Morgan Stanley (NYSE:), JPMorgan Chase & Co (NYSE:) and Citigroup Inc (NYSE:). Expected to drop 2% in March quarter compared to the cumulative profits for the December quarter.

This would represent their first quarter-on quarter profit decrease since the second quarter 2020 according to Refinitiv.

Title: Top investment banks’ quarterly profits, https://graphics.reuters.com/GLOBAL-MARKETS/znpneqxkzvl/chart.png

This data includes the top 65 banks worldwide with at least $10 Billion in market capitalization.

Analysts say lower revenue from fees and trade losses resulting from market volatility, which was triggered by Ukraine’s crisis, are likely to impact profits in the first quarter, despite an increase in net interest income.

Andrew Dinnhaupt is a portfolio manager at Franklin Templeton. He stated this month, “Market volatility may make it harder to issue equity and debt, which can lower income for these areas in the business that concentrate on underwriting stocks and bonds new as a major revenue stream,” in a memo.

“This could weigh on companies’ bottom lines, even if their traditional banking operations get a lift from higher (net interest income) and faster loan growth.”

Refinitiv data shows that the value of all pending and closed deals in the first quarter was $922 billion, which is the lowest figure since 2020’s second quarter.

Title: Global M&As – Quarterly volume, https://graphics.reuters.com/GLOBAL-MARKETS/klpykjndrpg/chart.png

While the number of transactions where Citigroup was a bookrunner fell 47% last year, those that involved BoFA Securities Inc were up by 53%. JP Morgan Chase The declines were 39% and 36% respectively.

Title: Drop in M&A deal value by bookrunner (in the first quarter of 2022), https://graphics.reuters.com/GLOBAL-MARKETS/myvmnqaadpr/chart.png

According to Refinitiv’s estimates, global equity issuance volume fell to $129 Billion in the first quarter from $390 Billion in the fourth quarter 2021. This was due to the virtual halt in initial public offerings.

Volumes of equity underwriting deals fell 80% at Morgan Stanley (NYSE:) and Goldman Sachs, the most prominent financial advisors for IPOs worldwide.

Title: Global equity issuance – quarterly volume, https://graphics.reuters.com/GLOBAL-MARKETS/byprjbqqepe/chart.png

Bill Fink, head of U.S. middle market banking at TD Bank, said M&A activity declined in the first quarter due to heightened uncertainties over the Ukraine-Russia conflict, supply chain interruptions and higher inflation.

“Plus the prospect of the Fed increasing rates beyond the number of times it originally projected, it’s a recipe for uncertainty – and the M&A market dislikes uncertainty as it impacts purchase multiples and ultimately purchase price,” he said.

Citigroup revealed that it has $9.8 billion of Russian-related exposure in February. It was responding to questions about whether or not the company will be required to hold funds aside to compensate for any losses. Mark Mason, chief financial officer of Citigroup, stated that nearly half could be written off in “severe stress scenarios”.

The earnings season for large U.S. banks will begin in April 13th.

Top investment banks’ quarterly profits https://tmsnrt.rs/3J17j4d

Global M&As – Quarterly volume https://tmsnrt.rs/35kfAlT

Global equity issuance – quarterly volume https://tmsnrt.rs/3tN3Aml

Drop in M&A deal value by bookrunner (in the first quarter of 2022) https://tmsnrt.rs/35ki5Vj

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