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$JPM Expects EM Sell-Off to Hurt Bank Earnings

“The emerging market selloff sparked by speculation the Federal Reserve will reduce stimulus may cut revenue for investment banks including Standard Chartered Plc and HSBC (HSBA)Holdings Plc, JPMorgan Chase & Co. (JPM)’s Cazenove said.

Emerging markets are going through the most disruptive period since the collapse of Lehman Brothers Holdings Inc. in 2008 based on the rise in equity, currency and rates volatility, according to the JPMorgan unit’s report titled “Fed Tapering: Who is Afraid of EM Selloff? We Are!”

The swings may cause a “material slowdown” in emerging market fixed-income revenues with volumes “drying up,” Cazenove analysts includingKian Abouhosseinin London wrote.

Cazenove said it’s more concerned about fixed-income revenue for Standard Chartered and HSBC than previously because of higher revenues related to emerging markets. It’s in “wait-and-see” mode for European banks with lending or earnings in Brazil, South Africa and Mexico, including Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), according to the report.

Standard Chartered spokesman Jon Tracey declined to comment as did Paul Tobin, a Madrid-based spokesman for BBVA, and HSBC spokeswoman Archana Achuthan. A spokesman for Santander wasn’t immediately available to comment.

Emerging market government bonds in dollars slumped 3.5 percent in May, the most in at least three years, according to the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS) Brazilian government local-currency bonds lost the most since October 2008 last month, according to JPMorgan’s GBI-EM Broad Brazil LOC Unhedged Index. South Africa’s rand has plunged 15 percent against the dollar this year.

BlackRock Trims…”

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