EU Capital Markets Revenues Strong in Q1, But COVID-19 Drives Higher Provisions
In Q1 2020, European banks capital market revenues were strong, reflecting high volatility and significant customer volumes in the trading businesses . These offset higher credit provisions associated with the Coronavirus Disease (COVID-19) and mark to market losses at some firms. As the effects of the pandemic continue to affect the economy, we expect these firms to be impacted by higher credit provisions in their capital markets divisions. Also, continued market volatility could lead to higher mark to market losses on certain assets. All of this could lead to a weaker contribution to earnings from capital markets divisions in coming quarters, especially if the strong trading revenue performance observed in 1Q 2020 is not sustained.
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