Being a trader in an investment bank has become a far more boring occupation than it used to be. Risk has been slashed, and access to balance sheets has been cut. Traders are leaving for hedge funds. Formerly dynamic traders are spending more time in the gym,
However, banks’ annual results reveal that not all banks have been equally harsh when it comes to cutting risk-taking in their trading businesses. While some traders have been hobbled, others are proceeding much as before. Based upon banks’ own measurements of Value at Risk, here’s which banks have cut risk-taking dramatically, and which banks haven’t.
1. Risk-appetite at Barclays: down 24% year-on-year in 2013
Barclays’ cut average risk-taking by 24% last year. Credit risk was reduced by 30%. Unusually among other banks, the risk taken by Barclays’ rates traders wasn’t reduced by much at all.
Source: Barclays
2. Risk-appetite at Bank of America: down 26% year-on-year in 2013
Bank of America Merrill Lynch doesn’t split out its daily Value at Risk (VaR) in as much granularity as other banks. However, it does say that VaR was cut by 26% last year.
Source: Bank of America
3. Risk-appetite at Credit Suisse: Down 25% year-on-year in 2013, down 7% in the fourth quarter
Source: Credit Suisse, measured in CHF
4. Risk-appetite at Deutsche Bank: Down 6% year-on-year in the fourth quarter
Source: Deutsche, measured in €
5. Risk-appetite at Goldman Sachs: Down 7% year-on-year in 2013, up 7% year-on-year in the fourth quarter
Goldman has reduced risk far less than competitors. VaR at the firm actually increased year-on-year in the fourth quarter of 2013, with both rates traders and FX traders taking on more risk than a year earlier. This increase in VaR still holds when diversification effects are taken out of the calculation.
Source: Goldman Sachs
6. Risk-appetite at JPMorgan: Down 50% for the trading business year-on-year in 2013, down 61% year-on-year in the fourth quarter
JPMorgan’s traders have been particularly punished when it comes to the ability to take risk. Risk-taking in the corporate and investment bank’s trading business fell 50% year-on-year before diversification benefits in 2013.
(Click to expand)
Source: JPMorgan, measured in $
7. Risk-appetite at Nomura: Down 28% year-on-year in 2013 (before diversification benefit). Up 17% year-on-year in the most recent quarter
Like Goldman, Nomura cut risk across the whole year in 2012-2013, but started to ramp risk up again in the last quarter,
Source: Nomura