For the past two years investment banking revenues in emerging Europe, the Middle East and Africa have been at least a third lower than pre-crisis levels.
According to Dealogic, although EEMEA has still had a slightly larger fee pool than Latin America, Asias fee pool has been around four times larger compared with only around 50% larger before the crisis. So how best, today, to deploy time, money and people within EEMEA as global investment-banking resources might be redeployed to Asia and Latin America?
Perhaps surprisingly, emerging Europe has increased its lead over Africa and the Middle East in terms of revenue. Despite all the talk about proximity to the eurozone, emerging Europe over the past two years has taken an even larger part of the overall fee pool for EEMEA than in the mid-2000s.
Poland has been the star in terms of revenue growth in the larger markets, even though it is among the closest to western Europe. Polands fee pool for the past two years has been over 60% more than in 2006 and 2007, the peak years for most other markets. Polish deal volumes in debt capital markets, equity capital markets and M&A have all been larger than before the crisis.
By comparison, Turkey has lagged behind, with revenues and deal volumes yet to recover. Russia has not grown quite as fast as Poland, but it has maintained its dominance within emerging Europe, where it still accounts for about two-thirds of the fees. Russian volumes in M&A and DCM for the past two years have been roughly at pre-crisis levels. Russian ECM volumes have lagged behind, yet partial privatizations will boost Russian equity issuance as global stock markets recover.
All this is in stark contrast to the Middle East, where Dubai became the destination of choice for investment bankers fleeing the sub-prime crisis in 2008. That was until oil-prices crashed along with regional property and stock markets. Middle East investment-banking revenues for the past two years were well below 2006 and 2007 levels, largely because of the dearth of equity issuance.
That leaves Africa, perhaps the most hyped EEMEA sub-region, particularly sub-Saharan Africa outside South Africa. But while East Africa has suffered from acute inflationary problems, Nigeria has failed to see a recovery in its stock market to the extent that pressure seems to be growing for the local central bank to bail out stockbrokers, to try to spur a recovery.
In terms of fees and deal volumes, South Africa is perhaps slightly less dominant in Africa than before the crisis, but the overall fee pool for Africa has been roughly half pre-crisis levels for the past two years, according to Dealogic.
Perhaps the moral of the story is that frontier markets are exciting to talk about if sometimes unpleasant to travel to but markets at a later stage of development might more consistently yield money, as in Poland and even Russia.