Investment banks: bittersweet - FT.com It is customary to adorn theatres with two masks - one smiling, the other sobbing. Those decorations should be moved to investment banks, which are suffering from a split personality. While dealmakers have a spring in their step, traders are downcast. Investors should take far more note of the latter. The third quarter is not over, but it is already clear that summer was bad for the traders, especially in fixed income, currencies and commodities (FICC). Jefferies has reported that fixed-income revenues in the three months to August were 85 per cent below the three months to May. And Barclays said that investment banking income in July and August was significantly below the same months in 2012 because of FICC weakness. Rivals such as Deutsche Bank and Citigroup are expected to follow suit as the third-quarter reporting season gets under way. Quiet markets and uncertainty over tapering are being blamed. But this is where diversification comes into play. Yes, trading was weak, but just look at all that M&A (Verizon/Vodafone, Microsoft/Nokia) and those initial public offerings (bpost, Deutsche Annington, Foxtons). Surely this is when those banks that kept dealmakers on the payroll when times were tough should feel the benefit. To an extent, that is true. There have been big jumps in US M&A and European IPO volumes in the year to date, according to Thomson Reuters. The problem for investment banks is that FICC is still a far bigger part of the pie than advisory work. Take Credit Suisse as an example. A 20 per cent drop in third-quarter FICC business would take SFr299m off revenues. A similar jump in advisory and underwriting income would add SFr174m to revenues. So it is no surprise that investors are favouring banks where FICC is less important than it used to be. Over the past three months shares in UBS, which has cut back its FICC business, and Morgan Stanley, which has expanded in wealth management, have outperformed most rivals. Not all is tragedy in the world of investment banking.