Investment banking fees plunged in 2016, but analysts predict 2017 pick-up


Global investment banking fees totalled $85bn in 2016, down 7.1 per cent (Source: Getty)

Global investment banking fees fell seven per cent last year, with the UK’s plunging even further, thanks to a decline in flotations, equity raisings and mergers and acquisitions (M&A) activity.

However, the decline was less marked in the second half of 2016, and analysts are predicting a recovery this year.

Thomson Reuters found global investment banking fees totalled $85bn (£69bn) in 2016, down 7.1 per cent on 2015’s $91.5bn. In the UK and Ireland, fees fell 14.3 per cent to $5.5bn.

Read more: After subdued 2016, these bankers are calling a 2017 bounceback for UK M&A

The report, published today, said the total global fees tally had been dragged down by a 30 per cent decrease in money from initial public offerings (IPOs) and 23 per cent decline in equity capital markets underwriting.

M&A advisory fees, meanwhile, which accounted for 31 per cent of the total, were down three per cent to $26.8bn.

JP Morgan retained its place at the top of the investment banking fees table, ahead of Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley and Citi.

Every bank in the top 12 – also incorporating Barclays, Credit Suisse, Deutsche Bank, Wells Fargo, RBC Capital Markets, UBS and HSBC – saw their fees total fall. Deutsche Bank, in eighth place, saw its total fall by the greatest amount – 20.1 per cent to $2.8bn.

Read more: Deal-making at investment banks is set to hit a 10-year high

Despite the decline, things look rosier for investment banks at the end of 2016 than they did half way through the year. In the first six months of the year, global fees came in at $41.8bn, down 15 per cent on the same period of 2015. In the second half, they were up two per cent on the same period in 2015 to $43.2bn.

Ian Gordon, a banking analyst at Investec, said there was a notable pick-up in activity in the second half of the year and suggested 2017 should be “more healthy”.

“Expectations have materially improved,” he told City A.M.

If we had been having this conversation nine or 12 months ago, expectations then were for an extended structural decline. At the very least, expectations have now moved to a slower decline – or a return to absolute growth.

Barclays analysts Jeremy Sigee and Kiri Vijayarajah are also hopeful for investment banking in 2017, with a note today forecasting rising revenues across Europe.

“The past year had a weak start but a strong finish, with trading businesses in particular stimulated by macro events and volatility across a range of asset classes,” the note said. “We expect this pattern to continue through 2017.”