Biggest U.S. Banks Expand Trading Dominance Over European Rivals By

(Bloomberg) — As the coronavirus helps the big get bigger across industries and regions, a trio of U.S. banking powerhouses is seizing market share from European rivals in trading revenue.

Goldman Sachs Group Inc (NYSE:)., JPMorgan Chase & Co. (NYSE:) and Morgan Stanley (NYSE:) captured almost 46% of the global market for trading stocks and bonds in the first half of 2021, an increase of nearly six percentage points from the same period in 2019, according to data compiled by Bloomberg. By contrast, the portion of the market commanded by European lenders fell to about 32%, a decline of roughly four percentage points, with firms such as Deutsche Bank AG (NYSE:) and HSBC Holdings Plc (LON:) ceding ground.

America’s biggest financial institutions are building on their gains with huge technology budgets and their equity market dominance, which allowed them to benefit when the pandemic sparked the most volatile period on record. The U.S. banks have been encroaching on European territory for more than a decade, after rebounding more quickly from the 2008 financial crisis courtesy of cost-cutting and regulation aimed at reining in risk.

“In times of uncertainty over the last year and a half or so, the big players have been able to step up,” said Barclays (LON:) Plc analyst Jason Goldberg. “The biggest U.S. banks have been able to capture more than their fair share as they leverage both relationship and technology. I don’t see them going backward.”

The U.S. trio has been adding market share since at least 2017, according to the data, which compared revenue from 12 U.S. and European banks for the first half of each year. The biggest jump came between the first six months of 2019 and the same period in 2020, when they captured almost five more percentage points, bringing their combined share to nearly $40 billion.

At the top of the list was Goldman Sachs, which has increased its overall share of the market by more than five percentage points since 2017, the most of the 12 banks. 

The Wall Street giant was able to snag more of the pie as it amped up technology investments and emphasized relationships with individual clients over single transactions, according to Marc Nachmann, who helps lead the trading division at New York-based Goldman Sachs.

“We’ve made a conscious decision to invest in technology in lots of parts of our business,” Nachmann said in an interview. “It becomes a scale game. You have to be able to afford to keep up with the technology spend to be one of the top performers.”

Goldman Sachs invested $4 billion in technology in 2019, according to a presentation that year. JPMorgan has been increasing its investments, and has a $12 billion annual tech budget overall, including for its retail operations. Morgan Stanley’s Chief Executive Officer James Gorman said in June that its tech budget is well over $4 billion.

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