Times are tough in the market for initial public offerings.

2016 has seen the fewest IPO deals, and lowest deal value, since the gloomy post-financial-crisis days of 2009.

There have been just nine IPOs this year in the US, raising a total of $1.2 billion, according to Dealogic. That's down from 33 deals worth $5.5 billion in the same period last year and 59 deals worth $10.1 billion in the same period in 2014.

Notably, none of this year's offerings have been in the tech space.

So what's going on?

Business Insider talked to a handful of bankers at some of the top-ranked houses for equity capital markets. They attributed the slowdown mainly to unusually volatile markets that started in late 2015, which have the typical IPO investors — hedge funds and mutual funds — spooked and unwilling to take a risk on an untested stock.

Companies might be able to pull off a sale right now, but only by offering the new shares at a steeper than usual discount to the new investors. So those that can afford to wait are choosing to do so until demand returns.

That said, most of the bankers we talked to expect activity, especially in the tech and consumer sectors, to pick up a bit in the spring — and even more into the second half of the year — as markets continue to stabilize.

Here's what they had to say:

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Peter Lyon — cohead of equity capital markets in the Americas, Goldman Sachs

Lyon expects the IPO market to pick up in the next couple of months — but only in fits and starts, at first. That's why his team is warning clients to be prepared.

"The advice we are now giving clients is: If you need to raise capital or want liquidity, get prepared now, because with the recent improvement in investor sentiment and risk appetite it is opening a window for both primary and secondary issuance," Lyon told Business Insider.

Lyon pointed to plunging oil prices earlier this year and concerns circling around the Chinese and Brazilian economies.

Markets have started to stabilize, Lyon said, but that needs to continue before IPO activity picks up.

"While the filed backlog is fairly diverse, the most likely first few names to hit the IPO market will probably fall within the technology, media, and telecom or consumer sectors," Lyon said. 

"Once a few transactions price and trade well, we think that will likely propel a broader group of prospective issuers to approach the market."

Paul Donahue — head of equity capital markets in the Americas, Morgan Stanley

Donahue pointed out that it's not unheard of for the IPO market to slow down as it has in 2016.

"What we're going through is normal," he told Business Insider. "IPO activity ebbs and flows, and I recall over the last 30 years or so there have been four or five very specific points in time where the IPO volumes have meaningfully slowed only to rebound later."

He expects things to pick up as early as next month.

"Starting in April we're likely to see the first real test of the strength of the IPO market," Donahue said. "I have every reason to believe that the IPO market not only will show signs of life but will offer compelling investment opportunities for the buy side."

As for which sectors might start to show IPO activity first, Donahue said: "I would leave it to growth equities in general, which includes technology companies and the growthier parts of consumer/retail companies. Good growth stories are interesting to the buy side and natural candidates to reopen the IPO markets."

Anthony Kontoleon — global head of syndicate in equity capital markets, Credit Suisse

Kontoleon said that while investors were interested in taking a look at IPOs, "they're not banging on the table yet."

Why take the risk of investing in something that you don't know as much about as your existing portfolio?

Plus, large-cap names have been outperforming smaller-cap names this year, and value names have outperformed growth names. IPOs, however, tend to be small-cap growth names — so they're not exactly the most attractive investments right now.

As for companies considering tapping the market, Kontoleon said, "I don't actually think the water's cold, but if you're not highly confident of investor sentiment, do you jump in, or can you just wait it out until there are stronger signals and data points?"

These issuers want to know that investors are excited to buy their stock, so they're being patient as long as they can. The better-capitalized companies, especially, have the luxury of waiting.

That said, they can't hold off forever. 

"You want to raise capital when you still can tell a very strong story around growth and your path to profitability," Kontoleon said.

Wall Street internships are insanely competitive.

In 2015, Goldman Sachs had 59,000 applicants for roughly 2,900 summer intern positions.

So if you're going to drop your résumé in a stack with thousands of others, you want it to look good.

We spoke with a former analyst at a bulge-bracket bank who has been through the process both as an applicant and, on the other side, as an analyst screening candidates.

He said there were only a few things the banks really look at on your résumé — and it's important to get them right.

Here's what you need to know.

See more on Wall Street recruiting, junior bankers, and breaking into finance here.

SEE ALSO: A Morgan Stanley exec says this is the one personality trait she looks for in every job candidate

The most important thing on your résumé is your GPA.

Your grade point average is "the first thing you look at on the résumé," the former analyst said. And it should be 3.6, preferably 3.7 or higher.

If it isn't quite as impressive as you'd like, there is a workaround: "Show it to 2 decimals if the decimal is under 5," the person said. "But if the second decimal of the GPA is over 5, round to the nearest 10th."

So if your GPA is 3.83, don't round down. But if it's 3.65 or 3.66, then round up and show it as 3.7.

Also, if you have a good GPA in your major, you can include that too — but there is no substitute for the overall GPA, the analyst said.

The next most important thing? Experience.

If you're a college junior applying for a summer internship, it's really important that you have some relevant experience from your previous summer.

The analyst said that even though sophomore-year internships were usually "soft" internships, the point is that you have something finance- or business-related on there.

Learn how to write about experience.

Don't just write what you did at your past gig. Point to the impact your work had.

The analyst gave an example of a weak experience line: "Used DCF, comparable companies, and precedent transactions to value Coca-Cola."

Versus a strong one: "Used DCF, comparable companies, and precedent transactions to value Coca-Cola; analysis showed that the company was undervalued by 15%."

But don't exaggerate! "It's so obvious to tell if someone is exaggerating," the former analyst said.

Investment banks are facing their worst year since the 2008 financial crisis.

While the focus has been on European banks – Credit Suisse has said it will most likely post a 40% to 45% drop in markets revenues, while Deutsche Bank missed ambitious targets in its rates trading division – no one has been immune.

Overall, fees for investment banking services, which include M&A advice and capital markets underwriting are down 29% in the first quarter this year compared to last year.

Investment banks collected $16.2 billion (£11.3 billion) in fee revenue, according to Thomson Reuters, which marks the worst start to the year since 2009 – a point at which the industry was in turmoil following the collapse of Lehman Brothers in 2008.

Here's how it looks on the chart:

While the woes at Deutsche Bank and Credit Suisse have been the most public, other big names have had a bad start to the year.

Goldman Sachs was pipped to the top spot for the first quarter by JP Morgan, falling back two places to third after Bank of America Merrill Lynch. Despite a strong showing in M&A advice, Goldman's investment bank fee revenue was down more than 38% at the start of 2016, registering just over $1 billion.

Here's the chart for the top 10:

And here's the global picture, which looks dire in every major region:

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JPMorgan CEO Jamie Dimon has thoughts on why big banks are important to America.

Dimon, whose firm is the largest US bank by assets, wrote an op-ed in The Wall Street Journal about the benefits of large financial institutions like his, and the services they provide to consumers and smaller banks alike.

He framed the conversation around the relationship between large and small institutions, and led with an anecdote about some negative comments about big banks that the CEO of a regional bank recently made.

"I did some digging and found that our firms have a relationship that goes back many years and spans a broad range of essential services," Dimon wrote.

But Wall Street CEOs like Dimon are busy people, and they don't often take the time to personally write op-eds.

So it's unlikely that this personal tiff with another CEO is really what motivated the billionaire chief executive to take up the pen.

What's more likely is that this is about something much bigger.

Breaking up the banks

Since the heyday of the financial crisis, politicians and activists have been calling for the end of "Too Big to Fail" banks. But this being an election year, the volume of that conversation has ticked up a notch.

On Tuesday, the Democratic presidential candidate Bernie Sanders said in a Daily News interview that JPMorgan "and virtually every other major bank in this country" are destroying the fabric of the US.

Last month the financial policy advocate Bartlett Naylor proposed breaking up both JPMorgan and Citigroup. His proposal is likely to end up in both banks' annual proxy filings.

And then there's the Minneapolis Fed President and former Goldman Sachs executive Neel Kashkari.

In his first speech as a Fed official, Kashkari, who led President Obama's Troubled Asset Relief Program in the wake of the financial crisis, came out swinging with a call to break up big banks.

He advocated for "Turning large banks into public utilities by forcing them to hold so much capital that they virtually can't fail (with regulation akin to that of a nuclear power plant)."

In that light, it's maybe not so surprising that Dimon would choose this moment to publicly defend his firm.

The fact that he framed it around some comments made by an unnamed regional bank chief probably means that Dimon, who is a Democrat, was simply looking for a way to do it without appearing overtly political.

Read the full op-ed at WSJ »

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Morgan Stanley is one of the best-known names on Wall Street.

It's also among the most prestigious places to work if you're hoping to build a career in finance.

To help potential job applicants, Morgan Stanley collected a list of things that make students stand out during campus recruiting, according to its own recruiters.

The traits are as much about personality as they are about smarts.

Here is what they look for in candidates.

See more on Wall Street interns, junior bankers, and breaking into finance here.

SEE ALSO: Want to intern at a Wall Street bank? Here's the first thing they'll look for on your résumé

Show your resourcefulness.

"I like to see that students have reached out to their college or university alumni who now work at Morgan Stanley. It shows they're resourceful, have initiative and are self-starters. You can also ask alumni questions you might feel uncomfortable asking a recruiter."

Stay calm and keep listening.

"There are group exercises that are designed to simulate problem solving under pressure. We look for people who can stay calm as the pressure increases. It's also key to listen to your team members. Leadership qualities are great, but it's also important to show you can listen to others and support their ideas if they make sense."

Know what you want and why you want it.

"When you interview with a certain business division, give a sense that you already know all about Morgan Stanley and what you're looking for. Go in, introduce yourself, say what you think you can offer Morgan Stanley, and tell us why you're interested in that business division."

Goldman Sachs has found a way to cut costs without reducing its employee headcount — and it's good news for young people.

CEO Lloyd Blankfein noted in his annual shareholder letter released earlier this week that overall compensation and benefits expenses have dropped by about $270 million over the past four years, while total staff levels are up 11%.

"Through a combination of shifting to a greater percentage of junior employees and relocating some of our footprint to lower-cost locations, we have managed our expenses well," Blankfein wrote.

Specifically, the number of analysts, associates, and vice presidents — that is, the more junior employees — is up 17% over the past four years, while the more senior managing director and partner population is down 2%.

The average front-office managing director at top-tier banks earns about $1 million a year in salary and bonus, while analysts make on average $110,000. Associates make $197,500, and VPs make $325,000.

A significant portion of Goldman Sachs' new hires, however, are in the operations, technology, and compliance divisions, rather than the revenue-producing divisions like investment banking or sales and trading, the firm has previously stated.

Goldman Sachs has also been outsourcing jobs from high-cost centers like New York City and London to lower-cost locations like Salt Lake City, Dallas, Irving, Warsaw, Singapore, and Bengaluru. About 25% of staff is now based in low-cost centers, Blankfein noted in the letter.

"Looking ahead, we will continue to pursue ways to be more cost effective by assessing our expense structure while ensuring we meet the needs of our clients," Blankfein wrote.

Goldman Sachs will release first-quarter earnings next Tuesday, April 19.

SEE ALSO: BLANKFEIN: The M&A boom isn't over yet

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Earnings season is about to kick off for Wall Street banks — starting with JPMorgan on Wednesday morning — and it's likely to be ugly.

The first quarter is typically the strongest for investment banks, but choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price are thought to have created a "perfect storm" for banks this year.

Investment banking revenue is down 36% across the Street, according to preliminary Q1 data from Dealogic — its lowest level since 2009.

Morgan Stanley's head of trading, Citigroup's CFO, and the CEO of JPMorgan's investment bank have all issued warnings.

Barclays' Jason Goldberg more recently summed up the troubles facing the Street. Those are:

• "A tough capital markets backdrop (both trading revenues and investment banking fees are slated to produce their worst 1Q results since 2009)"
• "Increased pressure to build loan loss reserves (reduced energy prices for much of the quarter, changes in the Shared National Credit exam grading methodology drives criticized loans higher)"
• "A not as favorable interest rate backdrop (10yr -50bps, 2s/10s -20bps during 1Q mitigating Dec. Fed hike benefit)"

Goldberg's team reduced first quarter earnings estimates for the vast majority of the banks they cover, particularly the market sensitive and energy-related firms.

That said, he expects to see continued loan growth above historical averages, good asset quality (except for energy), controlled expenses, tangible book growth, and more active share repurchasing.

JPMorgan is set to report at 6:45 a.m. Wednesday, followed by Bank of America and Wells Fargo Thursday, Citigroup Friday, Morgan Stanley Monday, and Goldman Sachs next Tuesday.

We'll be back with full coverage.

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JPMorgan just reported first-quarter earnings that beat on the top and bottom lines.

The firm on Wednesday reported earnings per share of $1.35 on revenue of $24.08 billion.

Analysts were expecting earnings per share of $1.24 on revenue of $23.80 billion, according to Bloomberg.

"We delivered solid results this quarter with strong underlying drivers," CEO Jamie Dimon said in a statement.

"While challenging markets impacted the industry, we maintained our leadership positions and market share in the Corporate & Investment Bank and Asset Management, reflecting the strength of our platform."

Earnings, however, are down significantly from the same quarter last year, when JPMorgan reported EPS of $1.61 on revenue of $24.82 billion.

The firm missed expectations on investment-banking revenue but beat on trading. Revenues in all of the major divisions were down from the same quarter last year.

Here's the breakdown:

• Investment-banking revenue was $1.23 billion ($1.36 billion expected), down 24% year-on-year. That was driven by lower debt and equity underwriting fees, the firm said.
• Trading revenue came in at $5.17 billion ($4.58 billion expected), down 11% year-on-year.
• Fixed-income trading revenue came in at $3.59 billion ($3.23 billion expected), down 13% year-on-year. That reflects "an increase in the rates business which was more than offset by lower performance across asset classes," the firm said.
• Equity trading came in at $1.58 billion ($1.35 billion expected), down 5% year-on-year.

Last quarter, JPMorgan beat on the top and bottom lines, reporting earnings per share of $1.32 ($1.28 expected) on revenue of $23.7 billion ($23.24 billion expected).

The first quarter is typically the strongest for investment banks, but analysts are expecting an unusually weak Q1 earnings season on Wall Street this year.

Choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price are thought to have created a "perfect storm" for banks. Investment-banking revenue is down 36% across the Street, according to preliminary Q1 data from Dealogic — its lowest level since 2009. More on that here.

Bank of America and Wells Fargo will report fourth-quarter earnings at 6:45 a.m. and 8 a.m. on Thursday.

SEE ALSO: It's earnings season on Wall Street — brace for a rough one

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JPMorgan reported first-quarter earnings Wednesday that weren't as bad as expected, setting the bar for the rest of Wall Street.

The firm announced earnings per share of $1.35 (versus $1.24 expected) on revenue of $24.08 billion ($23.80 billion expected).

It was a solid beat, and it comes out of a quarter that was expected to be disastrous.

The first quarter is typically the strongest for investment banks, but analysts had been expecting an unusually weak Q1 earnings season on Wall Street this year.

Choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price are thought to have created a "perfect storm" for banks.

Investment-banking revenue is down 36% across the Street, according to preliminary Q1 data from Dealogic — its lowest level since 2009. More on that here.

So while JPMorgan's earnings — and its revenues in all the major divisions — were down significantly from the same quarter a year ago, the fact that it beat expectations is a pretty good start.

That JPMorgan beat expectations does not guarantee that the others will too, but it does at least set a more positive tone as we start bank earnings season.

Bank of America and Wells Fargo will report fourth-quarter earnings Thursday at 6:45 a.m. and 8 a.m.

SEE ALSO: JPMorgan BEATS

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Morgan Stanley just reported first-quarter earnings that beat analyst expectations, despite a huge decline in profit.

The firm reported diluted earnings per share of $0.55 on revenue of $7.88 billion.

Analysts were expecting adjusted earnings per share of $0.47 on revenue of $7.76 billion, according to Bloomberg.

The results are down significantly from the same quarter last year, when Morgan Stanley reported diluted earnings per share earnings of $1.18 on revenue of $9.91 billion. 

Net income of $1.1 billion was down 54% from $2.4 billion last year.

"The first quarter was characterized by challenging market conditions and muted client activity," said CEO James Gorman in a statement. "Against that backdrop, our businesses delivered stable results."

He continued:

While we see some signs of market recovery, global uncertainties continue to weigh on investor activity. We remain focused on executing against our priorities, helping clients navigate difficult markets while controlling our expenses and managing risk prudently.

Morgan Stanley beat expectations on investment-banking and sales-trading revenues, but results were lower than the same period last year:

• Trading revenues were $2.69 billion for the quarter (versus $2.65 billion expected), down from $4.08 billion in the year-ago quarter.
• Fixed-income sales and trading revenues came in at $873 million (versus $791 million expected), down from $1.9 billion a year ago.
• Equity sales and trading revenues were $2.1 billion ($1.86 billion expected), down from $2.3 billion in the same quarter last year.
• Investment banking revenue came in at $990 million for the quarter (versus $982 million expected). That's down from $1.17 billion in the year-ago period.

Revenues in wealth management, typically Morgan Stanley's strongest division, were $3.67 billion, down 4% from $3.83 billion in the year-ago quarter.

Last quarter, Morgan Stanley beat expectations, reporting diluted earnings per share of $0.43 on revenue of $7.86 billion, excluding accounting adjustments.

The first quarter is typically the strongest for investment banks, but has been unusually weak on Wall Street so far this year. Choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price created a "perfect storm" for banks. More on that here.

JPMorgan, Bank of America, Wells Fargo, and Citi have already reported first-quarter earnings, each beating or matching analyst expectations despite significant declines in profit.

Goldman Sachs will report Q1 earnings on Tuesday.

SEE ALSO: Goldman Sachs is cutting costs big time

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NEW YORK (Reuters) - Volatile financial markets took a bite out of earnings at big U.S. banks during the first quarter – not just in trading but wealth management, too.

On Monday, Morgan Stanley joined Wells Fargo & Co and Bank of America Corp in reporting weaker wealth management profits, citing less client activity and "an unfavorable market environment"– not to mention fewer trading days than the year-ago period.

Big banks have doubled down on wealth management in recent years to serve as a ballast to other businesses that are struggling, particularly trading. But falling commodity prices, concerns about China's economy and uncertainty about the direction of interest rates created shaky markets last quarter, and led many wealth clients to stay on the sidelines.

Morgan Stanley said profit from its wealth management fell 8 percent during the first quarter, to $493 million from $535 million in the same period a year ago. Its pretax profit margin also fell to 21 percent from 22 percent because expenses did not fall as much as revenue.

Chief Executive James Gorman wants the margin to hit a range of 23 to 25 percent next year, largely by lending more money to clients – something its rivals already do well.

Last Thursday, Bank of America said its wealth management division's profit rose 13 percent to $740 million. That's because costly retention packages for financial advisers expired, helping offset a 2 percent revenue decline. Its pretax profit margin rose to 26 percent from 23 percent a year earlier.

On the same day, Wells Fargo said earnings from its wealth and investment management unit fell 3 percent. The business collected less fee income from clients because stock markets were weak, bank management said.

Analysts expressed little concern about the weaker results, saying banks performed relatively well, considering the hand they were dealt in the markets.

"Clearly the major issue is market performance," said Scott Siefers, analyst at Sandler O'Neill.

(Reporting by Tariro Mzezewa, additional reporting by Dan Freed; editing by Andrew Hay)

SEE ALSO: Wall Street banks are getting hammered by the markets — but not the businesses you'd expect

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Goldman Sachs just reported first-quarter results that missed on the top line but beat on the bottom.

The firm reported diluted earnings per share of $2.68 on revenue of $6.34 billion.

Analysts were expecting adjusted earnings per share of $2.48 on revenue of $7.11 billion, according to Bloomberg.

Net earnings of $1.14 billion were down 59.9% from the same period last year.

"The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses," said CEO Lloyd Blankfein in a statement.

This year, the firm beat analyst expectations on investment banking and total trading revenues — but each of the major divisions was down markedly from the same quarter last year.

• Trading revenue came in at $3.44 billion (versus $3.42 billion expected), down 37% from the same quarter a year ago.
• Fixed income, currency, and commodities revenues were $1.66 billion ($1.58 billion expected), down 47% from the same quarter last year.
• Equities-trading revenue came in at $1.78 billion ($1.84 billion expected), down 23% from the same period a year ago.
• Investment-banking revenue came in at $1.46 billion ($1.36 billion expected), down 23% from $1.91 billion in the year-ago quarter.
• Within banking, equity-underwriting revenues were $183 million, down 66% from the year-ago period, while debt-underwriting revenues of $509 million were up 24%. Advisory fees were $771 million, down 20% year-on-year.

Outside of trading and banking, investment-management revenues came in at $1.35 billion, down 15% year-on-year, reflecting "significantly lower incentive fees."

Investing and lending revenues came in at $87 million, down from $1.67 billion from the year-ago quarter, hurt by investments in both private and public equities that "were negatively impacted by generally lower global equity prices and corporate performance."

Compensation and benefits expenses were down 40% from the same period last year, but the firm said that reflected lower revenues this quarter. The ratio of compensation and benefits to net revenues remained "unchanged" at 42%.

News broke last week that Goldman Sachs was reining in the expenses in a major cost-cutting push. The firm said total staff decreased "slightly" throughout the quarter.

The same quarter last year was a massive one for Goldman, in which it reported adjusted earnings per share of $6 (diluted earnings per share of $5.94) on revenue $10.62 billion.

Last quarter, Goldman earned an adjusted $4.68 per share on revenue of $7.27. Diluted earnings per share were $1.27, due mainly to a $5 billion mortgage-backed-securities-related settlement the firm paid.

The first quarter is typically the strongest for investment banks, but has been unusually weak on Wall Street this year. Choppy trading conditions in early 2016, fears over China's growth, and collapsed oil prices have created a "perfect storm" for banks. More on that here.

JPMorgan, Bank of America, Wells Fargo, Citi, and Morgan Stanleyhave already reported first-quarter earnings, each beating or matching analyst expectations despite significant declines in profit.

SEE ALSO: Goldman Sachs is cutting costs big time

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Goldman Sachs reported pitiful first-quarter earnings on Tuesday, and now the firm is facing tough questions from analysts.

Questions like "When are you going to retake control of your destiny?"

On a call following the earnings release, Goldman's CFO, Harvey Schwartz, was candid about the firm's willingness to explore alternatives like acquisitions.

Here's his exchange with Rafferty Capital Markets' Dick Bove (emphasis added):

Bove: I don't see anything wrong with Goldman Sachs. I see things wrong with the world and that Goldman Sachs' position in the world is where things are wrong. And what I'm wondering is: When do you start thinking about doing a massive merger of equals?When do you start thinking about entering new business lines, which are radically different from the ones you're in now, understanding that you can't get anything more from what you're doing other than waiting for the tide to come in? In other words, when do you get control of your destiny, as opposed to sitting here for nine years letting the world control where you are and what you're doing?

Schwartz: It's all about language. I would agree with some of the things you're saying, [but] certainly wouldn't agree with your statement that we are waiting for the world to do what it does. If we felt like there is a client segment or transaction we could do that would benefit our shareholders and we could deliver to those clients, we would do it. We're open-minded. There is a reason why we're the leading advisory firm in the world — we would take our own advice.

Goldman Sachs' profits were down 60% in Q1 compared to the same quarter last year. Revenues of $6.34 billion were the lowest for any first quarter since CEO Lloyd Blankfein took over in 2006, according to Bloomberg.

And it was a similar story across the Street: At Morgan Stanley, profit crashed 54% last quarter. At Citi, it was 27%.

Morgan Stanley CEO James Gorman blamed his firm's poor performance on "challenging market conditions," while Blankfein cited "an operating environment" that "provided a broad range of challenges."

They're right — this quarter was an extreme one. Market volatility and choppy trading conditions in early 2016, fears over China's growth, and a collapsed oil price created a "perfect storm" for banks.

But the longer-term factors hampering bank profits — like near-zero interest rates and post-financial-crisis regulations that limit trading activity — remain. And it looks like Goldman Sachs recognizes that.

SEE ALSO: Goldman Sachs whiffs, profit crashes 60%

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Wall Street is sinking.

The big banks had a lousy first quarter. Hedge funds are getting pummeled. Regular institutional investors are flailing.

And they're all dragging each other down.

Goldman Sachs CFO Harvey Schwartz said on a recent conference call that nearly 80% of the largest active US equity mutual funds underperformed their benchmarks in the first quarter.

That hurts firms like Goldman, which have big equity businesses. In particular, slowing hedge fund activity weighed on the firm in the first quarter.

"We've had a big commitment to the hedge fund industry across equities and fixed incomefor a long time — we're always rooting for their performance," Schwartz said.

"In periods like we went through in the first quarter, obviously they have a tendency to derisk, and it reduces trading velocity over many months, although there may be, for example, an active day from time to time."

Essentially, as hedge funds hit hard times, they start to trade less. That means lower revenues for the banks they trade with.

And as Schwartz points out, Goldman's hedge fund business is an important one to the firm.

Hedge funds saw nearly $15 billion in investor funds pulled in the first quarter — their worst withdrawals in years, according to Hedge Fund Research.

Goldman reported miserable first-quarter earnings, with revenues hitting their lowest point since 2006. Trading revenue was down 37% from last year, with equities-trading revenues down 23%.

Equities revenues were down more significantly at Goldman Sachs than at rivals JPMorgan (where they were down 5%), Morgan Stanley (down 8.7%), Bank of America (down 11%), or Citi (down 19%).

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NEW YORK — Goldman Sachs Group Inc., the banking gold standard for the world's elite, sees a future in less prosperous investors.

A creative strategy taking shape inside the bank calls for it to partner with small brokerages and wealth-management firms to lend money to their clients, many of whom have far less wealth than what's in the typical Goldman private bank account.

The idea is for Goldman to reach a big set of borrowers, in the US and possibly abroad, without having to acquire them through a merger or build relationships one by one, people familiar with the initiative said. The plan is still in its very early stages and may not be active until next year, the people added.

The strategy is unusual not just for Goldman but across Wall Street, since most banks simply lend to their own customers. It also carries more risk because it may be harder to vet borrowers or the assets they post as collateral.

The bank is looking to earn money from a broader borrower base as profits from traditional businesses like bond trading have slowed down. In April, Goldman completed a deal to buy $17 billion worth of online deposits from GE Capital Bank to expand its reach on Main Street.

"Growing the lending business to a broader client base helps to offset some of the pain that has been happening on the trading side," said Steven Chubak, an analyst with Nomura.

Bankers involved with the Goldman plan say they are not upending its business model of catering to the uber wealthy. The typical client in Goldman's US private wealth unit has an average account size of about $50 million. Those customers are where Goldman remains primarily focused, said the bankers, who were not authorized to speak publicly.

Lending to wealthy individuals and corporate clients represented less than half of the balance sheet within Goldman's investing and lending business segment at the end of 2010, but that percentage is now more than 75%.

The new strategy will target clientele who are lower on the economic totem pole. Sources would not detail a wealth threshold for borrowers Goldman will reach through third parties but said they were likely to be "mass affluent"– which is broadly defined as those with less than $1 million in investable assets.

They declined to give details on how its partnerships with brokerages would work in terms of fees, underwriting, or collateral.

Goldman already has relationships with outside investment managers where it sells its own mutual funds, structured notes, and alternative investments. Loans would be an additional offering, people involved in the strategy said.

A Goldman spokesman declined to comment.

Hunt for profits

Goldman reported a 6.4% annualized return-on-equity in the first quarter, the lowest level since the second quarter of 2012 when adjusting for one-time items. In its heyday, Goldman produced returns above 30%. The measurement is important, because it shows how well the bank uses shareholder capital to produce profits.

Goldman's return has slumped because businesses like trading are struggling to generate the type of earnings they once did. That's partly because of weak markets but also because financial regulations introduced since the financial crisis limit the businesses banks can engage in and require them to hold much more capital.

These new rules are pushing Goldman and its closest rival, Morgan Stanley, to move further into traditional lending. It is still a relatively new concept for the two, which became bank holding companies at the height of the financial crisis in 2008 and have only focused on lending in recent years.

In addition to the third-party initiative, Goldman also wants to wants to do more "margin lending," which allows clients to borrow against a percentage of their assets, and do more lending abroad. Later this year, it plans to offer consumer loans online through a new effort led by former Discover Financial Services' executive Harit Talwar.

Goldman's moves mimic Morgan Stanley's in that both are trying to lend more, mostly through the wealth channel, and that many of the loans are backed by investment portfolios of stocks and bonds.

But their strategies differ in that Morgan Stanley is lending to its own clients, after having bought the Smith Barney brokerage business from Citigroup Inc. years ago in a transformational deal. Goldman does not have ambitions to acquire any kind of large brokerage or depository bank, sources said, and hence it is pursuing loan growth through third-parties.

Goldman has already tripled loans to its own private wealth management and corporate clients over the past three years, according to regulatory filings. It had $45 billion in loans altogether at the end of 2015.

That loan book soaked about half of the deposits it had at the end of 2015. The GE deal added another $16 billion in deposits, most likely depressing that ratio. By comparison, Morgan Stanley lends out about 55% of its deposits and has said publicly it was targeting to grow that percentage to 70%.

There is danger in being too aggressive in expanding a loan book when there is tough competition for good borrowers, as there is today. Goldman's strategy may carry additional risk: because borrowers are not in-house, the bank may have to rely on other firms to vet credit histories and assess asset values.

It is unclear how Goldman plans to manage those risks.

(Reporting by Olivia Oran in New York; Editing by Lauren Tara LaCapra and Edward Tobin)

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Halliburton and Baker Hughes officially called off their $28 billion megadeal on Sunday, and three banks stand to lose nearly $100 million as a result.

The oil field services giants terminated their merger agreement after facing opposition from antitrust regulators in the US and Europe.

It's bad news for Goldman Sachs, Credit Suisse, and Bank of America Merrill Lynch, which were advising on the deal and stood to earn up to $110 million in fees, according to the consultant Freeman & Co.

Now they are likely to lose more than 85% of that.

Halliburton's advisers, Credit Suisse and BAML, had been expected to earn $41 million and $15 million. But $37 million of Credit Suisse's pay was contingent on a deal close, according to Freeman, while about $13.5 million of BAML's pay was contingent on a close.

Baker Hughes' adviser was Goldman Sachs. About $44 million of the $54 million it was expected to earn was contingent on a deal close, according to Freeman.

That's $94.5 million in lost fees for the banks.

Halliburton-Baker Hughes is not the first megadeal from 2015 to fall apart. Last month the Pfizer-Allergan merger, a deal that would have been worth $160 billion, was also called off because of regulatory hurdles.

Goldman Sachs, Centerview Partners, Guggenheim, Moelis, JPMorgan, and Morgan Stanley lost more than $200 million in combined advisory fees from that deal's termination.

SEE ALSO: Halliburton's megamerger with Baker Hughes is officially over

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When most investors look at Goldman Sachs, they see it as a fixed income, currencies, and commodities (FICC) trading business — but they may be missing the bigger picture.

That's according to UBS' Brennan Hawken, who wrote in a note on Monday that Goldman Sachs is actually starting to shift its business mix back in the direction of equities trading.

Right now, the "core revenue picture" indicates at least more of a balance between key business divisions, Hawken noted.

"In our view, Goldman has dynamically allocated capital to different businesses as the opportunity set has changed," Hawken wrote. "We believe they are in the midst of another such shift as the outlook for FICC profitability has become structurally constrained."

He continued (emphasis ours):

It is our sense that investors have recently viewed the declines in its FICC business as a liability for Goldman, but we believe this is not the whole story. Goldman is thought of as a play on FICC as that business has represented the largest portion on Goldman's revenue pool in recent years. However, we see the rise of Equities at Goldman as no mistake, and believe this is the direction Goldman has chosen for the foreseeable future.

Goldman recently reported catastrophic first-quarter earnings, with profit down 60%. FICC revenues were down 47% from the last year. The firm is also reportedly laying off more people than usual from the fixed-income division.

Hawken noted that Goldman's primary business revenue lines are actually pretty balanced at the moment, and expects them to each generate 20-25% of total revenue this year.

Have a look — equities appears to be on an upward trajectory while FICC is in decline:

There is a pretty simple reason for most of the attention being focused on Goldman Sachs' FICC business. That is the part of the bank that is suffering most right now, and where other banks are cutting back. 

Morgan Stanley for example last year laid off 25% of staff in that division and promoted Ted Pick, who ran equities, to global head of sales and trading, overseeing FICC as well.

Goldman has been asked repeatedly about its own commitment to that business. CFO Harvey Schwartz in January expressed optimism about the FICC business, indicating that Goldman would continue to stay the course, largely maintaining its presence while rivals pull back.

"Everyone has to acknowledge that financial services is a cyclical industry," Schwartz said on a call at the time. "There certainly is an upside case" for FICC.

Still, there has been change. The bank announced on Friday that its cohead of global FICC sales, Dalinc Ariburnu, would leave the firm. His exit was the latest in a series of new appointments and departures in that business. 

But according to Hawken, analysts and investors should be looking elsewhere. 

"Despite all the attention to FICC restructuring, we have seen European bulge bracket firms cede Equities revenue share in recent years given the pressure they are under from the leverage ratio," Hawken wrote.

"We see this as an opportunity for Goldman, given the strength of their [prime brokerage] and Equities franchise."

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A slew of European investment banks put out first quarter earnings on Tuesday and it's a mixed bag.

While several beat analysts' forecasts, the overall theme is a big drop off in profits from last year, signaling just how tough the market is right now.

Here's the breakdown:

• UBS:Net profit of Swiss francs 707 million (£504.9 million, $741 million), in line with estimates but well below last year's figure of Swiss francs 1.98 billion (£1.4 billion, $2 billion).
• BNP Paribas:Net profit of €1.8 billion (£1.41 billion, $2.08 billion), beating forecasts and up from €1.6 billion in the same quarter last year. Net income up 10.1%, but revenue down 2%.
• Commerzbank:52% drop in first-quarter net profit to €163 million (£128 million, $188 million).
• HSBC: Pre-tax profit of $6.1 billion (£4.1 billion), down from $7.1 billion (£4.8 billion) a year earlier but above forecasts of $4.3 billion (£2.9 billion).

All of the banks flag "difficult market conditions". Here's UBS on why the first quarter was so tough (emphasis ours):

In the first quarter of 2016, heightened economic and geopolitical uncertainty, as well as global market volatility, led to more pronounced client risk aversion. For the industry this translated into abnormally low transaction volumes for a first quarter, and particularly for UBS when compared with the exceptional first quarter of 2015.

And here's BNP Paribas who, remember, actually had an expectation-beating quarter (again, emphasis ours):

At 1,318 million euros, Global Markets’ revenues were down by 24.4% compared to the first quarter 2015 due to a wait-and-see attitude by investors during the first two months of the year: concerns over global growth and on banking regulations combined with uncertainties over monetary policies.

It looks like the first quarter isn't just a flash in the pan either. UBS points out that the "underlying macroeconomic challenges and geopolitical risks highlighted previously continue to contribute to client risk aversion and are unlikely to be resolved in the foreseeable future."

Rates are still low with no sign of them rising. Central bank stimulus policy looks to be running out of gas. China is a massive growth question mark. And increasing banking regulation means costs are only likely to go up. Buckle up.

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Mergers and acquisitions, or M&A, deals have been falling apart lately — and it's starting to seriously hurt Wall Street.

Wall Street banks have lost $1.2 billion in revenue this year because of withdrawn global M&A, according to Dealogic.

That's up 33% from the same period last year — and at its highest level since 2007.

Lost revenue from megadeals, or deals worth at least $10 billion, makes up 65% of the total withdrawn M&A revenue this year. In 2007, megadeals made up 58% of withdrawn M&A, according to Dealogic.

Of the $1.2 billion in lost revenue, $736 million came from abandoned deals in the US, and $280 million came specifically from withdrawn healthcare deals.

The total value of withdrawn M&A deals this year is $481 billion, according to Dealogic.

The largest transaction to fall apart in 2016 is the Pfizer-Allergan merger, which would have been worth $160 billion. It was scrapped last monthafter the US Treasury announced new rules clamping down on so-called tax inversions.

That cost advisers more than $200 million in revenues, according to the consultant Freeman & Co.

Then there was Honeywell's $103 billion bid for United Technologies, which it abandoned in March, and Canadian Pacific Railway's $40.7 billion bid for Norfolk Southern, which collapsed in April.

Halliburton and Baker Hughes on Sunday called off their $28 billion megadealafter facing opposition from antitrust regulators in the US and Europe. That lost Wall Street banks more than $100 million in advisory and financing fees, according to Freeman.

SEE ALSO: 3 banks just lost close to $100 million from the collapse of another megadeal

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Fixed-income trading has been the blight of Wall Street for years — but it may have finally hit a bottom.

Five years of declining revenues in fixed-income trading culminated in a horrendous first quarter for banks in 2016.

At Citi, first-quarter fixed-income revenues were down 15%. At Goldman they were down 47%, and at Morgan Stanley they were down 54%.

But a "path to sustainable growth" could be closer than we think.

That's according to Christian Bolu and Susan Roth Katzke of Credit Suisse, who on a recent call with clients highlighted several factors suggesting that a fixed-income revenue inflection is coming.

Here are some of those factors:

• Macro businesses, which make up about 40% of fixed income, bottomed in the third quarter of 2014 and are now growing.
• The credit spread widening cycle appears to have peaked, and stabilization in the credit market could help fixed-income growth in the second half of the year and into 2017.
• The rates-trading business will drive longer-term and sustainable fixed-income growth. The rates market has increased "significantly" since the crisis.
• As global monetary policy normalizes, it will boost demand for hedges and speculative activity, which should also boost fixed-income revenue growth. The analysts expect that trend to take place over the next 10 years.

"The macro outlook is absolutely critical here,"Katzke said on the call. She said "macro stability would support improved fundamentals."

Morgan Stanley laid off 25% of its FICC team late last year, and Goldman Sachs on Thursday laid off fixed-income traders. Credit Suisse this week laid off 80 people in fixed income in its London office.

SEE ALSO: Investors are missing the big picture about Goldman Sachs

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