It seems as though the low interest rate, low volatility environment is hitting not only the results of Forex brokers, but also the big boys.
Banking giant Credit Suisse (NYSE:CS) reported its second quarter results today, and they came in with a worse-than-expected loss of CHF 700 million ($775 million). A good part of the loss was anticipated, given Credit Suisse’s recent settlement of charges with US Government authorities relating to helping thousands of wealthy American clients evade paying taxes. The $2.6 billion settlement is the highest in a US criminal tax investigation to date, and investors already knew that the settlement would reduce credit Suisse’s Q2 profit by about CHF 1.6 billion (about $1.8 billion).
What the market didn’t anticipate was that CS’s Revenues would be down, both QoQ (off 1%) and YoY (off 6%), as slow markets took their toll. Credit Suisse itself pointed out that the largest decreases in revenues, 9% YoY in its Private Banking and Wealth Management division, were caused ‘primarily from foreign exchange client business…’.
To see the complete Credit Suisse Q2 report summary click here (pdf).
We believe that the decrease CS is experiencing in its FX business is part of a continued phenomenon seeing traders abandon banks in favor of electronic trading platforms to take care of their currency trading needs – part of a continued backlash stemming from the 4pm FX fix controversy, still under global investigation.
Although Credit Suisse gave itself a clean bill of health as far as the FX fix goes, they still (like many other big banks) lost some key FX personnel, some voluntarily and some not voluntarily, including head of spot FX trading Danny Wise.
We expect more financial and strategic fallout from FX trading as banks continue to report results.