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With volatility subsiding and markets normalizing, the big U.S. banks are seeing capital markets revenues drop, Fitch Ratings reports.

The five largest U.S. banks — Bank of America Corp., Citigroup, Inc., Goldman Sachs Group, Inc. JPMorgan Chase & Co., and Morgan Stanley — saw their combined capital markets revenues decline by 17% in the second quarter of 2021, as market conditions improved.

Fitch reported that trading revenues were down 28% from last year, led by a 43% drop in revenues from fixed income, currencies and commodities (FICC), compared with last year’s record levels.

Equity trading revenue actually held up, rising 8% from last year, but down 18% from the first quarter.

In Q2, Fitch said that all of the banks except Goldman Sachs posted gains in equity trading year over year, “led by strong performance in cash and equity derivatives.”

And, while trading activity was down from last year’s heights, Fitch said that the activity outpaced the volumes recorded in the second quarter of 2019 — “on the back of still robust client activity, outperforming many banks’ own expectations.”

The weakness in trading was offset, in part, by strength in the investment banking business, Fitch said, “as vaccinations and economic re-openings induced corporate confidence for deal making and capital raising.”

Equity underwriting fees were up 12%, driven by strong activity in initial public offerings (IPOs), Fitch said.

Debt issuance gained just 1%, “as an active acquisition finance market was offset by lower [investment grade] issuance,” Fitch noted.

Moreover, M&A advisory revenues jumped 53%, thanks to record deal levels.

“Investment banking strength is poised to extend into [the second half], with all banks citing strong pipelines,” Fitch reported.

“M&A activity and IPO markets are expected to remain active as strategic discussions with corporate clients remain elevated, reflecting strong C-Suite confidence and the prospect of a sustained U.S. economic recovery,” it added.