In a crisis, there are always winners. Some banks have been doing pretty well out of the latest one.

As the world economy slowed to a near standstill in the fight against the coronavirus pandemic, leaving millions unemployed and companies depending on cash lifelines, one corner of global finance thrived: securities trading. From JPMorgan Chase & Co. to Citigroup Inc., Wall Street firms had their best quarter in years buying and selling stocks and bonds. The feast probably won’t last.

From the historic stock-market correction, to the unprecedented government and monetary stimulus packages and the spike in trading volatility, a “unique combination of events” drove client activity to unprecedented levels, according to JPMorgan’s chief financial officer, Jennifer Piepszak. All told, her bank posted $7.2 billion in revenue from trading shares and bonds in the first three months of 2020, up by almost one-third from the first quarter of 2019. That was its best performance in this business, according to Bloomberg data. Citi posted a 39% jump in revenue, Goldman Sachs Group Inc. a 28% increase and Bank of America Corp. a 22% rise, largely exceeding analyst expectations.

The banks were helped by a strong start to the year before the Covid-19 outbreak hit — the U.S. stock market had reached record highs as had debt underwriting. But the surge in trading flows during the March crisis was pivotal. At their peak last month, daily trading volumes in rates and commodities were more than three times greater than the average daily volumes in January, according to JPMorgan. Currency trading reached levels that were more than twice the January average.

The extraordinary operational and financial challenges faced by the investment banks meant this performance — which softened the blow from the billions of dollars of provisions that they made for possible credit losses — was by no means guaranteed. As we entered the lockdowns, it was unclear whether securities firms could manage the dispersal of teams of traders who thrive on proximity and depend on ultra-fast electronic connections. The extreme price and liquidity swings during March’s markets meltdown could have caught them out at the best of times. While JPMorgan and Bank of America have been putting pressure on traders to go into the office, most staff have been working remotely, many from home. Regulators had to allow for greater flexibility around compliance.

And what worked for the Wall Street giants doesn’t necessarily work for everybody. While traders usually love volatility, the breakdown of historic trading patterns has caught some finance firms off guard. As wild price movements rocked the markets, many hedge funds and high-frequency traders pulled back from equity derivatives, for example, allowing JPMorgan and Citi to step in, Bloomberg News reported last month.

For others there could be trading losses eating into revenue. Take France’s BNP Paribas SA. My Bloomberg News colleagues revealed that the French bank, typically a leader in stock derivatives, lost an estimated 200 million euros ($219 million) on equity derivatives, including dividend futures and structured products. The widespread cancelling of corporate dividends also ate into Goldman’s equity revenue, the bank said on Wednesday. The performance of Europe’s investment banks in the quarter remains uncertain.

At the same time, the extraordinary market gyrations and central bank and government interventions are unlikely to be repeated. The near-term markets outlook is uncertain. Goldman executives said trading activity has remained higher than average in the first two weeks of April, but Citi expects a “normalization” of trading in the second quarter. “Low rates and low economic activity may even be a headwind,” JPMorgan’s Piepszak said.

Morgan Stanley CFO Jon Pruzan said on Thursday that trading volume has fallen by between 20% and 30% since March. The bank warned that without the trading boost it got in the first quarter, the crisis will hit earnings.

In a report published this month, Oliver Wyman, a consulting firm, and Morgan Stanley estimated that a 2% drop in global gross domestic product in 2020 would cause credit and equity trading revenue to plummet, with rates and currency trading only offsetting part of the hit. That would cause revenue at the global banks to fall by as much as 17% this year to $131 billion. 

The Federal Reserve’s historic move on April 9 to buy some junk bonds will facilitate trading. But the specter of steep falls in banking revenue this year remains. The International Monetary Fund expects global GDP to shrink by 3% in 2020.

Scale is the only way to shield profitability, according to the Oliver Wyman-Morgan Stanley report. That puts Wall Street in position to build its lead over its European rivals. But for all banks, the early crisis wins can’t be counted on.

(This column was updated with a comment from Morgan Stanley’s CFO Jon Pruzan on trading volumes.)

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.

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