Net Income Of Large U.S. Banks Soared Since Financial Crisis: NYFED

Net income for the five largest U.S. dealers, including JPMorgan and Citigroup, has been much higher and less volatile since the financial crisis than before, with a Sharpe ratio of net income for these top dealers coming in nearly twice as high now since the crisis, according to a NYFED report. Tobias Adrian and team highlight in their post published at the Federal Reserve Bank of New York that estimated returns to market making are at historically low levels, a finding inconsistent with market analysts' argument that higher capital requirements have trimmed market volatility.

Higher capital requirements vs. Increased cost of market making

Adrian and colleagues point out that since the financial crisis, major U.S. banking institutions have increased their capital ratios in response...