Last year was one of the worst for global investment bank revenues since the financial crisis as the 12 top players in the sector made less on the markets than they did in 2008, according to research firm Coalition.
Total 2019 revenues at the 12 leading global investment banks amounted to $147.5 billion, down from $151.4 billion in the previous year, Coalition's latest sector index showed. The decline was driven by a 10% drop in equities trading with equity derivatives falling the most.
Revenues in the groups' investment bank divisions, including deal origination and advisory, equity capital, and debt capital market business, were also down — by 3% year over year — due to "a marginal decline" in mergers and acquisitions activity and weaker equity capital market business in Asia, Europe, the Middle East and Africa.
After two years of decline, revenues from trading in fixed-income, currencies and commodities grew 3% year over year to $66.2 billion in 2019, the data showed. Spread products, G10 Rates, and commodities were the main growth drivers in FICC, Coalition said.
Coalition tracks equities, FICC and IBD revenues at Bank of America Corp., Barclays PLC, BNP Paribas SA, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings PLC, JPMorgan Chase & Co., Morgan Stanley, Société Générale SA and UBS Group AG.
The overall revenue decline was a key contributor to the 60-basis-point drop in average return on equity in Coalition's sample to 7.5% in 2019, from 8.1% in 2018. The total negative revenue impact on ROE was 0.7 percentage points and the remaining 0.2 percentage point decline came from higher risk-weighted assets and exposure, Coalition said.
Headcounts at the sample banks has also seen its steepest decline since 2014, chiefly due to banks cleaning house in their equities trading units, Coalition said. In 2019, total headcount fell 6% year over year. The number of people employed in equities trading dropped 10% year over year, while the FICC trading headcount fell 7%. The number of IBD employees remained relatively stable with a marginal decline in equity capital markets.
Weaker trading revenues have triggered major business reshuffles at several banks, with HSBC most recently announcing a large-scale revamp in which it will shift $100 billion of predominantly investment banking risk-weighted assets from the U.K. and the U.S. into commercial banking in Asia and others. The bank is also planning to cut 35,000 jobs within three years.
Coalition is owned by CRISIL. CRISIL and S&P Global Market Intelligence are owned by S&P Global Inc.