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Revenue from trading Israeli currency, bonds set for 5

year high

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Top banks set to make $475 mln from Israel-linked trading

- data

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JP Morgan expected to be top gainer

By Stefania Spezzati and Libby George

LONDON, Nov 26 (Reuters) - The world's top investment

banks are on track to post the highest revenue in five years

from trading Israel's bonds and currency thanks to the

volatility caused by the 14-month long war in the Middle East,

data seen by Reuters show.

Banks are expected to post $475 million in fixed-income,

currencies and commodities trading (FICC) revenue linked to

Israel in 2024, a more than 10% increase from 2023, amid

increased volatility primarily in the shekel, the Israeli

currency, data from Vali Analytics Ltd show.

The revenue rise illustrates how global banks are making

money on price gyrations in Israeli assets as the country's wars

in Gaza and Lebanon grind on. The conflicts have boosted Israeli

inflation, limited economic growth and increased borrowing

costs.

JPMorgan Chase & Co. ( JPM ), the largest U.S. bank, is expected to

be the top gainer among 10 global lenders surveyed by the data

firm, raking in about $70 million so far this year from such

trades, according to a person with knowledge of the matter.

Though that is a tiny fraction of global trading income, the

double-digit increase highlights how trading Israeli assets has

been a bright spot in otherwise muted trading activity this

year.

Vali Analytics expects the 10 global banks to post no growth

in FICC income overall this year.

Goldman and Citigroup ( C/PN ) have the biggest share of the Israeli

FICC market after JPMorgan ( JPM ), the person added, while European

banks have a smaller portion.

Goldman, Citi and JPMorgan ( JPM ) declined to comment.

Under pressure from activists and governments, some of

Europe's biggest financial firms have cut back their links to

Israeli companies or those with ties to the country, Reuters

reported earlier this month.

Reuters could not establish how European banks fared in the

trading rankings.

JPMorgan ( JPM ) has been investing in Israel, where it opened its

office in Tel Aviv in 2000. It currently has about 200 employees

there.

BIGGER SWINGS

JPMorgan's ( JPM ) global income from fixed-income markets trading

declined by 2% to $14.7 billion in the nine months to September

compared to the same period last year, according to a bank

filing.

Volatility favours traders who bet on the future direction

of an asset.

Early this month, the shekel's one-month implied volatility

closed at its highest level since October 2023. It began to

trade consistently above euro volatility in early 2023 - with

the bigger peaks and troughs creating money-making opportunities

for traders.

"Israeli currency volatility has increased as a result first

of more divided politics and concerns over institutional

stability with the controversial judicial reform and then,

obviously, the war on multiple fronts," said Hasnain Malik, head

of emerging and frontier markets equity strategy at Tellimer.

The Israeli government passed a series of laws in 2023 aimed

at neutering the powers of Israel's Supreme Court in favour of

Prime Minister Benjamin Netanyahu's executive branch, alarming

investors.

The conflict in the region that followed further increased

swings in markets. The shekel has strengthened by nearly 3%

against the dollar this month due in part to hopes for a

ceasefire deal between Israel and Iran-backed Hezbollah in

Lebanon.

"That volatility suits banks whose spreads widen but hurts

operating businesses exposed to imported inputs or exported

finished products," Tellimer's Malik said.