Already struggling at home with weak revenues and tough new capital and leverage requirements, investment banks are now also facing a slump in their once most promising business -- emerging markets.
Fees are plummeting because of a sharp decline in first-time share listings and mergers across such economies.
Given the shaky economic outlook and weak equity valuations it is hardly surprising that global deal-making volumes are taking a hit. But the slump in emerging markets, an area banks had most hoped would drive growth, is especially precipitous.
It is a major factor forcing many banks to re-assess investment banking in the emerging regions, where they had expanded most in recent years, says James Sproule, head of capital markets research at Accenture in London.
He estimates Western banks conducted over half of all equity financing deals in emerging markets last year, compared with just 22 percent back in 2005.
The big money came from initial public offerings, or IPOs, where underwriting banks can pick up 3-4 percent of capital raised. And as emerging IPOs boomed, so did equity bankers' fees -- they topped $6.5 billion in 2007, a six-fold rise from 2000.
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Now, a painful retreat has begun.
Fees for underwriting first-time share sales in emerging markets almost halved in 2012 from last year to $2.8 billion, according to data compiled by Thomson Reuters. That's far bigger than the 18 percent drop in global equity finance fees.
And IPO proceeds tanked 40 percent this year from 2011 levels, the data shows. Merger deals in emerging markets are down 16 percent from 2011 versus a 4 percent fall worldwide.
Size has suffered too. A $4 billion listing by Santander Mexico topped the IPO scales this year, a far cry from 2009 and 2010, which featured jumbo-sized deals such as Agricultural Bank of China's $22 billion IPO and Santander's $9 billion debut on the Sao Paulo market.
The blow has been softened by this year's boom in debt finance but with overall investment bank fees still down 24 percent year-on-year, more job losses look inevitable.
Banks will be keenest to protect core New York or London franchises but Accenture's Sproule reckons the emerging markets cull too will be market-specific rather than across-the-board.
"You are seeing banks having to make strategic decisions. They may feel: too many people went into, say, India and maybe there are more opportunities for example in Thailand," he said. "That's likely to be the case rather than 'we haven't made much money this year so lets pull out."
But the retrenchment already is brutal in its scale.
Citi for instance announced 11,000 job cuts worldwide and will shut shop in emerging markets such as Turkey, Uruguay and Romania. That came months after it sold bank stakes acquired in more optimistic times, from Turkey's Akbank and India's HDFC to China's Shanghai Pudong.
Peers Credit Agricole, HSBC and UBS have also taken the axe to jobs and operations outside key financial centres. Barclays is predicted to cut 15 percent of its investment bank staff worldwide, including its M&A advisory in the Asia-Pacific.
And Credit Suisse shut its investment banking office in Moscow. It said it was "realigning resources to growth areas."
Russia and BRIC peers Brazil, India and China have in fact been hit hardest. IPO proceeds fell two-thirds from 2011 levels to nine-year lows this year and are 80 percent down from 2007.
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BRIC stock markets have lagged broader emerging markets this year after a 25 percent fall in 2011. Economic growth too has suffered, with India and China expanding at the slowest pace in a decade and Brazil reverting to zero growth.
China offered the richest pickings over the past decade as over 500 companies, including state-owned oil, telecom and infrastructure giants, debuted on stock markets.
"Asia had a long run of state-owned enterprises come to market, and I don't expect we will see the same level of that type of activity in the future," says Maria Pinelli, global vice-chair of strategic growth markets at Ernst & Young.
"Many(Chinese) big state-owned enterprises have gone."
Better times may yet return -- across emerging markets there is a full pipeline of capital-hungry businesses which will want to go public once markets recover. If economic growth picks up and debt financing becomes costlier, IPOs could resume.
John Lomax, head of emerging equity strategy at HSBC says firms will want rising stock markets but also less volatility.
Emerging stocks have recouped most of last year's 20 percent losses but 2012 has been characterised by big market swings that opened and shut dealmaking windows with little warning, he says.
"There's a relationship between equity behaviour and deal flow and what you need to see for deals to pick up is for equity markets to behave well," Lomax says.
At least the debt boom looks set to continue -- emerging market companies borrowed a record $250 billion-plus this year.
Unfortunately for banks, bond underwriting fees are usually far less lucrative than IPOs.