A cursory look at the latest investment banking league table leads one to an inevitable conclusion; that investment banking in Europe is becoming more and more the preserve of the American bulge bracket banks.
There’s an exception to this trend, of course. Deutsche Bank, with a 10.5 per cent market share of all equity linked deals, including rights offerings, is currently top of the table in terms of volumes, according to Bloomberg data.
But below Deutsche comes Goldman Sachs, followed by JP Morgan, Morgan Stanley and Bank of America Merrill Lynch. There’s been a gradual reduction in the influence of the Swiss banks. UBS lies in sixth place , while Credit Suisse is in eighth.
Whether this has any impact on where companies float is debatable. There is one theory, for example, that technology companies tend to float in New York more because of the US bias of our investment banks. The theory is that the more European-focused advisers have seen their influence diminish, thereby reducing the voice of those who want to locate technology companies (or others) in London.
Bankers note that Credit Suisse’s tumble in the business of equity capital markets, which includes advising on new issues and rights issues, is especially stark. Partly the slide has been inevitable since the group as a whole, which missed profit forecasts yesterday, decided to focus more on profit rather than volume, and hence has deliberately avoided some of the deals that bring with them lower margins.
Critics wonder whether Credit Suisse might see its London franchise deteriorate too much by adopting such a stance. The bank has been involved in several high-profile deals in London such as the Countrywide and Foxtons IPOs and the restructuring of Thomas Cook. But is this enough? Choosing between volumes of business and profit is often a delicate balancing act.
Building up an equities franchise is a costly and lengthy, laborious process, and breaking into a high position in the league tables is tremendously difficult to achieve.
For all the money that banks like the Canadian RBC put into the business, it is difficult for them to break into the top positions.
RBC is twenty fourth place in the latest table, with Jefferies, the US bank that bought Hoare Govett, scaling the heights at 17. That’s despite both banks being involved in a number of high-profile transactions in London.
Even Barclays, which acted riskily on the block trade for Ziggo, the telecoms group, and ended up with a large stake (which it fortuitously sold on), is only in ninth position.
Give up market share at your peril. It’s a devilish job to win it back again.