7 Things That Indicate The Future Of Investment Banking Ain't That Bright

The Titanic

Here's a note of 7 things that appear to indicate that the future of investment banking ain't that bright.

And you should be more concerned if you work in Europe and the US.

1. Most of ther big investment banks / investment banking divisions have announced fairy large lay-offs, or have imposed hiring freezes of various kinds.

2. Dealogic data reveals that global investment banking net revenues for last month came in at their lowest level ($2.952bn) since August 2003 ($2.878bn). Net revenues for Europe ($573m) hit a 14-year low (since 1997's $544m).

3. European ECM deal volume accounted for just 4% of global ECM activity in August, the lowest monthly percentage share on record.

4. European ECM deal volume totaled just $603m in August 2011, the lowest monthly volume on record.

5. A new report released by McKinsey looks at the capital markets businesses of the world's 13 largest investment banks and investment banking divisions of universal banks, measured by revenue.

The reports considers the impact of regulations, including Basel II.5, Basel III, the Dodd-Frank Act and other regional regulations. The paper sets out to analyse the full impact of these in relation to trading and services in foreign exchange, rates, credit and commodities; cash equities and equity derivatives; prime services; and proprietary trading.

It estimates that the post-crisis return on equity of about 20% across the top 13 global firms will be reduced, before any mitigating actions from the firms, to about 7%.

6. Bloomberg reports that banks in Europe are 'exploring ways to cut costs by routing more of their trades and other business through overseas subsidiaries' in a bid to save on tax and to get around burdensome regulation.

Chris Matten, a partner at PricewaterhouseCoopers, has said that firms could record as much as 30% of the value of their trades through Hong Kong, Singapore and other jurisdictions instead of hubs such as London and New York without running into trouble with regulators.

7. The Telegraph has reported that some traders fear that a new market crash is on the way in a matter of weeks, one that could be 'more severe ....than the one triggered by the collapse of Lehman Brothers'.

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