But Zeus Capital, a boutique investment bank founded in 2002, offers a success story. Albeit while operating on a smaller scale than the likes of Citigroup, Morgan Stanley and Barclays.
In the year to March 2016, it completed 23 transactions, raising £1.5bn – up from £500m – and saw its revenue increase from £16m to £25m. Zeus also reported pre-tax profits of £11m.
Speaking to City A.M., chief executive John Goold and chief operating officer Darren Ellis tell how Zeus has used the “perfect storm” hitting larger investment banks to its advantage.
“The big banks are pulling out [of our market],” says Goold. “And you've then got the smaller brokers... three-quarters of them are not substantially profitable. And those things combined mean that there's an opportunity for new guys to take advantage of the opportunity.”
So what's gone wrong for the bigger investment banks? In addition to wider economic issues that have led to recent revenue falls, Ellis points to “absolutely bananas” EU legislation capping bankers' bonuses under the Markets in Financial Instruments Directive (MiFID).
This meant “some of the salaries doubled over night,” says Ellis. “That was incredible. It's the last thing that anybody wanted to happen. [Now,] if you want to get rid of someone, the cost of making them redundant on a salary that's twice the level that it was is just so punitive – it's incredible.”
Goold adds: “The bonus cap has almost driven a sword through these banks because it's whacked up the cost base in a sector that needs variable costs. Because it's cyclical. And because of the cranking up of basic salaries to counter the bonus legislation, they've almost semi-crippled themselves.”
This, Goold says, has led to a “perfect storm” for larger investment banks. And Zeus, which is too small to be affect by the bonus cap, is there to take advantage of the “market fallout”.
Bearing in mind how EU legislation has affected larger banks, Goold and Ellis say they are surprised by the widespread support from bigger banks for the UK remaining inside the European Union. (Goldman Sachs, JP Morgan and Citigroup are among those who have donated to the Remain campaign.)
“It clearly shows there're a lot of positives to Europe from a City perspective,” says Goold.
Zeus does not have a house view on the EU referendum. Without giving away which way they will be voting, Goold and Ellis suggest their business could benefit either way.
“[In] small and mid-cap, I'd say it's business as usual,” says Goold. “There's almost an in-built hedge for the UK. In that I think if we stay in we'll probably get some rally. And I think if we go out, the currency's going to fall and exports will get a rally.”
Ellis (pictured above) adds: “We're seeing a lot of corporate activity. Maybe ignoring what happens with Brexit... we've got a lot stuff going on in retained and private and public.
“So generally you look at that and think, actually, business has got to be done and no one's putting the brakes on, certainly in our world at the moment.”
Zeus' power growing
Goold joined Zeus four years ago, when the investment bank was 10 years old and had just opened an office in London, having previously been solely based in Manchester.
Since then, Zeus's headcount has grown from 20 people to around 50 now. A “near-term” target is for Zeus to grow this figure to between 60 and 70.
Both Goold and Ellis put the growth and success of Zeus down to the people they have been able to hire and the culture of the organisation.
“The culture is quite experienced brokers – all been around the block, all want to enjoy their jobs,” says Goold.
Among the recent recruits is Ellis, who moved to Zeus from Canaccord around seven months ago.
How does Zeus tempt people away from bigger firms?
“The senior guys have got to enjoy it,” says Goold. “We can get the money equations to work, but the culture is really important.”