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Investment banking: Primary markets stopped in their tracks

Investment banking revenue figures compiled by Dealogic for the first nine months of 2011 confirm a shocking sudden stop in the third quarter of the year. Global investment banking revenue reached $53.2 billion in the first nine months of 2011, up 10% from the first nine months of 2010. That increase was despite third-quarter revenue of just $11.8 billion being the lowest total since the first quarter of 2009 and down 45% from the second quarter’s $21.4 billion.

The top-ranked investment banking revenue earners are quite settled but Credit Suisse managed to move up one place from sixth in the first nine months of 2010 to fifth in 2011, partly because of its strong performance in less badly affected regions including southeast Asia and Australia. Wells Fargo Securities moved into the top 10, rising from 13th for the first nine months of 2011.

Citigroup bank equity analysts suggest that activity stopped in its tracks across most sectors of the primary market, with M&A down 21% from the second quarter to the third, debt capital markets volume down 47% quarter to quarter, with high-yield issuance particularly weak, and loans down 41%, with leveraged loans revenue particularly weak, down 47%.

Equity capital markets fared even worse, with revenue down 52% in the third quarter on the second.

Bad news came at the very end of September when the Spanish government pulled the IPO of state-owned lottery company Loterias. The government had initially hoped to raise up to €9 billion by selling 30% of its most prized asset, money that might have helped bolster public finances as European policymakers struggle to contain contagion fears over eurozone sovereign debt.

When investment banks leading the deal suggested that the sale might struggle to raise as much as €7 billion to €7.5 billion, it was postponed before bookbuilding began.

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