In This Article:
(Repeats Thursday item)
By Jamie McGeever
LONDON, May 24 (Reuters) - The first quarter of 2018 was a rollercoaster for investment banks, involving record highs for stocks, the biggest bout of market volatility in years and the strongest ever start to a year for merger and acquisition activity.
It was a challenging period for the top U.S. and European banks alike. While equity trading was highly and surprisingly lucrative, two familiar trends were clear: U.S. banks lording it over European banks, and shrinking bond trading activity.
Wall Street's top five banks earned billions more from financial market trading, advisory fees and investment banking activity than Europe's seven biggest banks, and there's no indication that the gap is about to close.
Quite the opposite. Figures from industry analysts Coalition show that the top 12 U.S. and European banks raked in $43.83 billion in Q1, of which Wall Street's five powerhouses accounted for $27.29 billion and the seven European banks $16.55 billion.
That revenue split of 62 percent vs 38 percent in favour of the U.S. banks is the widest gap since Coalition started tracking comparable data in 2012.
JP Morgan, the world's biggest bank, occupies first or second spot in almost all the sector rankings, while other U.S. banks have made big strides in recent years, like Morgan Stanley in equities and Bank of America Merrill Lynch in credit.
Europe's big banks are struggling in the face of intense pressure from U.S. rivals aggressively grabbing market share, so much so that many are reducing their presence in certain markets. Some are pulling out altogether.
Can Europe reverse the trend? Without consolidation at the top it looks unlikely to happen soon. Some banks, such as Credit Suisse and Deutsche, have cut back so much in recent years that challenging the Wall Street behemoths again seems impossible.
Deutsche, which has had four chief executives in six years, is slashing thousands of jobs, with equities sales and trading staff falling by 25 percent. And sources close to Barclays deny reports that the bank is seeking to merge with rivals.
Barclays is probably one of only two European banks that could challenge Wall Street's hegemony, the other being HSBC. But with U.S. banks occupying the top five places in the rankings, and their dominance increasing, it's a tall order.
STOCK STRENGTH, BOND BLUES
Overall revenue across the top U.S. and European banks was up three percent in Q1 from the same period a year ago. This was driven by a 28 percent surge in equity revenue to $13.8 billion, the second best Q1 since the financial crisis and biggest Q1 rise since Coalition began analysing this data in 2006.