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* Brexit provides boost to trading volumes
* Banks also able to extract better margins
* Longer-term revenue outlook remains bleak
By Patrick Graham and Anjuli Davies
LONDON, July 5 (Reuters) - A one-off boost from dramaticmarket moves after Britain's vote to leave the European Unionwill only briefly relieve pressure on profit targets for banks'trading businesses struggling with razor-thin margins anduniversally low interest rates.
Senior managers with some of London's big banking playerstold Reuters that currency businesses were as much as 15-20percent behind their profitability targets for this year priorto huge moves in sterling and other currencies in the wake ofthe Brexit vote on June 23.
Managers from three of the top six banks in this year'sEuromoney survey of market share, while declining to be named,said they had seen trading volumes up to 4 or 6 times higherthan usual on the night of the referendum result.
Currency trading platform EBS has said that daily volumes atleast doubled to top $200 billion while spot trading incurrencies on platforms owned by Thomson Reuters jumped by threetimes.
"Obviously if there is more client activity even just in theshort-term that will help," said the head of currency tradingwith one of the top 10 foreign exchange banks in London.
"It is no secret or surprise that the macro or fixed incomespace has been pretty tough for most of this year. The challengeis will we really see more client activity over the summer ifthe political situation remains this uncertain."
Geopolitical shocks like the Brexit vote can spur morevolatile moves in currencies which in turn lead to bankscharging clients higher spreads or margins to the interbankrates available to them at a given time on the market.
Traders say that even last week, several days after thevote, spreads were still 30-50 percent wider than the norm. Onthe night, on sterling against a variety of other currencies,they were up to several times that.
Individual banks rarely break down the performance of theirforex trading arms but a number of the bankers who spoke toReuters said that big London-based operations which run largebooks in sterling were best positioned for the Brexit mayhem.
"It was a sterling-led event and you would naturally expectthose global houses with strong sterling capabilities to be thebest positioned to help their clients," said Lisa Francis, Headof Corporate FX Sales Europe at Barclays.
GOOD TIMING
Data from industry analytics firm Coalition in late Mayshowed trading in fixed income, currencies and commodities(FICC) divisions declined 28 percent year-on-year to $17.8billion (12.3 billion pounds).
Bond volumes in particular have suffered from the lack ofreturns and absorption by central bank buying of much of thepaper that would normally be traded on the open market.
"Five or six different heads of FX businesses I've spoken tohave said they were 15-20 percent down going into this thing soit came at a good time," said the global head of foreignexchange trading with one of the banks.
"Typically these are the slow summer months. We may see moreaction from the central banks over the summer that will keeppeople heavily involved. That gets us into the US election. So Ithink volatility won't be as high but it will be higher."
A number of the analysts who look closely at banks forinvestors, however, predict the revenue outlook for the rest ofthe year will get even worse because of the Brexit vote.
Analysts from Citi and JP Morgan argue that lenders willhave to wear the huge falls in the value of some of the assetson their books around the vote -- up to 40 percent in somestocks, more than 10 percent on sterling itself.
There is also the potential that a more sustained equitymarket sell-off may follow in the months ahead.
Likewise, if banks generally have been struggling to makemoney with bond yields at rock bottom, they have only gone lowersince the vote.
"Primary, and to a lesser extent secondary volumes, are nowlikely to be subdued for some time on heightened economic,political and market uncertainty," Citi analysts said in a notelast week
"This uncertainty, together with the associated marketvolatility, is likely to greatly reduce the number of deals andtransactions which complete in the market." (Editing by Keith Weir)
