Revenues in investment banking slipped 18 percent in the first quarter of 2014 compared to the same period last year despite a surge in mergers and acquisitions, highlighting the squeeze on global investment banking.
Often regarded as the culprit for global financial crash of 2008, the industry that specializes in large and complex financial transactions has been targeted by lawmakers around the world in recent years.
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And with cutbacks and new regulations on the horizon, research group Dealogic has said that revenues totaled $15.5 billion in the first quarter, the worst first quarter for investment banking since 2010. This quarterly figure is in stark contrast to figures released last year, when every quarter showed revenue of over $17 billion.
In the U.S., revenues fell 22 percent from the same time last year, according to the figures released on Tuesday. In Europe they fell 9 percent and in Japan they slipped 13 percent. JPMorgan continued to lead the global revenue rankings for the sixth consecutive first quarter with a $1.2 billion boost to its coffers and a wallet share of 7.9 percent. The bank was closely followed by Goldman Sachs which had 7.8 percent of a total share of the revenues.
In terms of products, the debt markets continued to be a cash cow for banks, despite revenue dropping to $4.8 billion, down 26 percent year-on-year. Meanwhile, market activity like mergers and acquisitions (M&A) and initial public offerings (IPO) pulled in different directions.
As global stock markets have surged to new all-time highs, IPOs have returned in abundance with companies all hungry to raise more capital. Dealogic said that IPOs helped drive the overall revenue increase in the sector with $1.4 billion of revenue generated in the first quarter, a 61 percent increase from the same period last year.
On the downside, M&A revenue decreased 9 percent to $3.8 billion (year-on-year) despite the volume of M&A surging to $746.9 billion in the first quarter of the year, up 15 percent from the first quarter of last year. A spokesperson for Dealogic told CNBC that with mega deals - including the acquisition of Time Warnerby Comcast - still pending, total revenues might not be realized until the second quarter of 2014.
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Recent years have brought uncertainty for banks with the specter of regulation hanging over them in many jurisdictions. There have also been calls to separate their activities from those carried out by retail banks. In the euro zone, stringent asset quality reviews are underway with the view of bringing all of the region's banks under a single supervisor.
As well as this uncertainty, banks have been busy reshaping their operations. In the U.K. Barclays is braced for further job losses at its investment bank. It is due to announce the results of a review into its investment banking operations by the summer and has already announced job cuts of 12,000 in the bank as a whole this year. Reports from both Bloomberg and the Financial Times, citing people familiar with the situation, said last week that Germany's Deutsche Bank was planning to cut more jobs at its investment bank to lower costs as its business stagnates.