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Investment Banking Revenues Lowest Since Crisis

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Amid global macro headwinds and unprecedented volatility in markets, performance of investment banks continues to remain under pressure.

According to Dealogic data, which recently released its preliminary investment banking review for the first-quarter 2016, global investment banking revenues in the quarter declined 36% year over year to $12.8 billion and marked "the lowest quarterly total since 1Q 2009."

The investment banks experienced drop in revenues across all products, while the biggest decline was recorded for fees from the Equity Capital Markets (ECM).

On a year-over-year basis, ECM fees plummeted 55% to $2.3 billion. Initial public offering volume in 1Q 2016 tanked down 74%.

Debt Capital Market (DCM) revenues declined 32% year over year to $4.1 billion. Revenue from high yield bonds plunged 70% while investment grade revenue fell 13%.

Also, revenues from Syndicated Lending decreased 30% $1.9 billion as investment grade loan revenue plummeted 50% in the quarter.

Dealogic noted that following three consecutive year over year increases, mergers and acquisitions revenue was down 24% in the first quarter 2016 to $4.4 billion. The decline reflected lower revenues from both strategic and sponsor related revenues.

The only silver lining was in China. With soaring debt issuance, DCM revenue in the Chinese market climbed 79% year over year to $615 million - the highest first quarter total on record.

Notably, JPMorgan Chase & Co. JPM had the highest share in global investment banking revenues (8.1% ) during the first-quarter 2016, followed by The Goldman Sachs Group, Inc. GS ( 7%), Bank of America Corporation BAC (6.7%), Morgan Stanley MS (6.6%) and Citigroup Inc. C (4.7%).

Bottom Line

Post crisis stricter regulations have already resulted in a challenging environment for the investment banks. Besides, globally investment banks at present are facing revenue pressure as issues pertaining to market turmoil, low interest rates, volatility in commodity prices and slowdown of emerging markets continue to affect business and client activity levels as well as market volumes.

As the first quarter is nearing end, given the dismal figures in the preliminary report, top line growth of the investment banks is likely to be affected at least to some extent in their upcoming quarterly results.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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