Investment banks' revenue set to decline again in 2015: survey

Revenue at the world's 10 largest investment banks is on course to decline again in 2015 by two percent to US$148 billion compared to a year ago, although a strong showing in equities will limit the fall, a survey on Tuesday showed. 

PHOTO: BLOOMBERG

NOV 17, 20158:18 AM

[LONDON] Revenue at the world's 10 largest investment banks is on course to decline again in 2015 by two percent to US$148 billion compared to a year ago, although a strong showing in equities will limit the fall, a survey on Tuesday showed.

It follows a weak third quarter, when revenue slipped by 8 per cent, the survey by industry analytics firm Coalition showed.

Investment banking revenue has slumped in recent years, especially in Europe, as tougher regulations, litigation costs and market volatility have prompted banks to restructure, shedding staff and exiting certain business lines.

Trading in fixed income, currencies and commodities (FICC) divisions, which make up about half of investment banks'revenues and has been particularly hit by new regulation, is set to fall a further 7 per cent to US$64.8 billion in 2015 compared to last year, Coalition's data showed.

It has declined by about 50 per cent at the top 10 investment banks globally since 2009, according to the data.

One bright spot was banks' equity businesses, where revenue is set to rise 12 per cent year-on-year to US$44.8 billion, as investors rotate out of fixed income products into equities with the prospect of a US rate hike in December looking increasingly likely.

Investment banking divisions (IBD), which advise on mergers and acquisitions (M&A) and equity and debt underwriting are set to record a 6 percent decline from last year to US$38.2 billion, with a buoyant mergers and acquisitions market offsetting weakness in debt and equity issuance.

Across all the investment banks tracked by Coalition, which include Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS, revenue declined 8 per cent in the third quarter to US$34.1 billion compared to a year ago.

In the third quarter, FICC revenue declined 18 per cent to US$14.2 billion, IBD revenue declined 3 per cent to US$9.1 billion and equities revenue increased 4 per cent to US$10.9 billion.

Headcount at the investment banks declined 1 per cent in the third quarter compared to a year ago, with a 3 per cent decline recorded in FICC, whilst IBD and equities remained the same.

REUTERS