Difficult times for investment banks
Print Edition
REVENUE at the world’s 12 largest investment banks fell 25 percent in the first quarter from a year ago as economic uncertainty and investor caution led to the slowest start since the financial crisis, a survey showed yesterday.
Investment banks have been hit by a steep decline in oil prices, near-zero interest rates and worries about China’s economy, which triggered a wave of volatility in financial markets at the start of the year, normally the most lucrative period.
Trading in fixed-income, currencies and commodities (FICC) divisions, which are particularly exposed to economic conditions, declined 28 percent year on year to US$17.8 billion, according to industry analytics firm Coalition.
Since 2011, revenues in FICC are down 49 percent and the headcount in that area has fallen 33 percent, it said.
Credit and securitization experienced revenue declines of 62 percent and 74 percent, respectively, during the period.
Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.
The downturn comes as banks are having to comply with new regulations forcing them to hold more capital, reduce risk-taking and scale back market-making activities, all of which are squeezing liquidity from capital markets.
Other divisions proved equally dismal, with revenues down across the board.
In banks’ equity businesses, a bright spot last year, revenues fell 20 percent year on year in the first quarter to US$11.7 billion as investors reduced risk appetite. Since 2011, revenues have fallen on aggregate by 11 percent in equities with headcount declining 12 percent.
Investment banking divisions (IBD), which advise on mergers and acquisitions, and equity and debt underwriting saw a 25 percent decline compared with last year to US$7.8 billion as reduced deal volumes and a slump in capital markets activities weighed.
Equity capital markets (ECM) activity fell 58 percent year on year to US$1.1 billion, after a dearth of new listings in choppy markets. Since 2011, ECM revenues are down 59 percent.
IBD revenues have fallen 23 percent since 2011 on aggregate, with headcount dropping 14 percent.
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