Good times over for investment banks?

6 September 2006

The recent runaway success and profitability of investment banks around the world may be about to come to an end, financial analysts have warned.

The first half of 2006 has been widely regarded as a boom period for investment banking, with many banks reporting record profits thanks to the favourable market conditions and lucrative mergers and acquisitions.

However, there is a general feeling that conditions are set to change, with the big name banks likely to feel the effects.

The profits of top Wall Street and European investment banks are expected to take a hit in the third quarter from a general slowdown in mergers and acquisitions activity, according to analysts, who are reportedly slashing their profit estimates for some banks.

The current slowdown is also almost certain to have an effect, as will generally more sluggish stock trading, Shaheen Pasha of CNN Money has also said.

And several banks themselves have already urged caution, including Switzerland's UBS, which has warned of difficult market condition in the future.

However, few are suggesting that a crash in the industry is imminent, rather that the near-perfect market conditions are unlikely to continue for much longer.

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