As in previous quarters, American investment banks continued their remarkable run of profitable trading days in the first quarter of this year. Bank of America, Citigroup, Goldman Sachs and JPMorgan recorded positive net trading revenues every day in the first three months of the year. Morgan Stanley, a laggard by comparison, lost money on only four days during the quarter. (Citigroup does not routinely report its daily trading results, but mentioned that it had no losing days in the first quarter.)
“Like peering through a grimy factory window, trading revenue histograms can provide a few clues as to what is happening down on opaque trading floors,” Moody’s writes in a recent commentary. Normally, a lack of negative trading days would be a positive sign of the “strength and diversification of customer franchises and risk management expertise,” Moody’s claims. But the stellar performance of banks’ trading operations is, perversely, becoming a risk as regulators and investors cast aspersions on the motives and methods that these market makers employ to generate bumper profits on their own accounts.