EU investment banks face a decline in market share

By Nicole Miskelly | 3 July 2015

The FT reports that the big six US investment banks all increased their market share during the first half of 2014, in comparison to their European (EU) rivals who faced a decline in this area.

According to data from Thompson Reuters, JPMorgan Chase made $3.31bn from advising companies on mergers and acquisitions, loans and share sales. Goldman Sachs followed closely behind JPMorgan after increasing its fee income to $3.29bn, which is almost 12 per cent year-on-year.

While Morgan Stanley, Bank of America Merrill Lynch and Citigroup, all increased their market share despite a drop in their income free, the FT reports.

This is compared to the EU groups, which suffered a decline in fee income during the beginning of this year, and industry experts have said could be down to the pressure they are under form regulators and investors to restructure their investment banking operations.

The weak performance of EU banks compared to US banks has been evident since the beginning of the year, when Wall Street’s top banks saw levels of profitability during the first quarter that had not been seen since the financial crisis. The data from Thomson Reuters also shows that Europe’s investment banks are on course to lose market share in primary markets activity for the 10th consecutive year.

The FT reported that Goldman Sachs saw a 15 per cent return on equity and a sales and trading revenue of almost 25 per cent, whereas European banks, Credit Suisse and Deutsche Bank, only saw a 10 per cent and 3 per cent return on equity and a 15 per cent and 10 per cent sales and trading revenue, in the first quarter.

The United States ability to bounce back after the financial crisis also played a part in the banks’ success in this area and because banking investment activity in the US has recovered much more quickly than in the EU, it has meant that US banks took the biggest share in underwriting and M&A fees. 

The bank that faced the steepest decline, according to the report, was Royal Bank of Scotland which suffered a 36.3 per cent fall in fee income. The bank, which plans to cut a significant number of jobs in the coming years, is also closing a number of its investment banking operations outside of the UK in an attempt to reduce activity in the sector.


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