The Greek crisis turned out to be a blessing in disguise, at least for traders who struggle to make profits when prices in the financial markets remain steady. Traders make more profits when prices swing between highs and lows. The turmoil in the debt-stricken country has been causing volatility, which in turn ramps up profits at the securities divisions of the investment banks in Europe.
Last Friday, France’s Banque Nationale de Paris reported its highest quarterly profit since 2012. BNP posted an improvement of 22% in terms of equities revenue and 4% in fixed-income sales. The reported data suggest good growth in commodities and currencies.
Moreover, UK’s Barclays (LONDON:BARC) reported a 10% expansion in its forex business and Germany’s Deutsche Bank (XETRA:DBKGn) revealed that their revenue from trading currencies and bonds rallied by 16% during the second quarter.
For years, traders have watched the decline in market volatility due to the almost-zero interest rates from the biggest central banks in the world that remain unchanged, coupled with banks devoting less money to sell and purchase securities. Because of the issues in Greece, there has been more volatility in the interest-rate market and better opportunities for traders to make profit.
The possibility of a Grexit didn’t spark contagion, in the sense that market participants are expecting that Italy, Portugal and other weaker countries within the Eurozone will follow. However, it has caused prices in the various financial markets to jump back and forth. Thus, creating profit opportunities.
According to Euronext, which is a stock exchange spanning France, Belgium, Netherlands, UK, and Portugal, they had the highest trading volumes in 5 years during the second quarter. The average daily trading volumes rose by over 40% compared to the previous year. Furthermore, the stock market in Germany also experienced increased volatility in the recent quarters.
These boosts in profits and heightened volatility present a dilemma for banks which have committed to scale down trading. However, since the possibility that Greece will jeopardize the euro has faded this month, market volatility has also been rapidly curbed.
As Greek Prime Minister Alexis Tsipras puts great effort into keeping his government together in the midst of the citizens’ opposition to the bailout agreement put forward by its creditors, some traders may be hoping that he doesn’t succeed.