"The market has permanently shrunk," says RBC's Gerard Cassidy of fixed-income trading business at banks. FICC income of $22B in Q1 was off 37% from a year ago, and updates recently from the likes of Citigroup (C +0.6%), JPMorgan (JPM -0.5%), and Goldman Sachs (GS -0.4%) suggest Q2 could be worse.
Of the two reasons - a new regulatory regime putting the squeeze on bank business practices and the absence of volatility, one may go away, but the other isn't.
“What these companies have decided to do, some more dramatic more than others, is restructure their business,” says Cassidy. “You just have to manage your business differently by realigning your cost structure to the new level of revenues due to the changes form rules, regulations and laws."