At first glance, total fees paid to investment banks in 2011 do not seem all that bad considering the turmoil of the past 12 months.
According to data released by Thomson Reuters, global fees were $80.9 billion – down just 6% on last year.
Look deeper and the news is far worse. Total fees for Q4 2011 compared with the same period in 2010 are down 40%. The bad news is geographically uniform – all of the main regions, including Asia, are down by around that amount.
Bankers who dispute that we are now in an era of lower fees – the new normal you keep hearing about – are in denial. Global fees peaked at $115 billion in 2007. For the past four years, they have averaged around $80 billion. That shows just how much fee froth developed over the latter days of the leverage and credit bubble.
The M&A and loan markets recorded a rise in fees; in capital markets, the news was uniformly awful, with ECM fees down 25% on 2010 and DCM fees falling almost 20%.
Most of the top-10 banks’ fees have held up reasonably well. Top-ranked JPMorgan saw its fees decline by just 2% year on year.
However, the exceptions have suffered terrible years: Goldman Sachs falls one place to fourth but its fees declined by more than 11%; UBS dropped 15%; RBS declined 16%; and Nomura’s fees plummeted 34%.
Any bright spots? Well, fees from Russiawere up 28% on the year. But bankers hoping that the big emerging market countries will pull them through should not hold their breath. Fees in China fell by 25%, in India by 33% and in Brazil by 30%.
Asia-Pacific, where the market for investment talent is more heated than ever, showed a cooling in terms of business volumes: down more than 12% compared with last year.
However, Asia is the most competitive market, by some distance: the top-five firms in the region took under 12% of total fees.
In the US, which is still close to 50% of the global fee pool, the top-five firms took 25% of the fees on offer. No wonder the top-four firms in the overall fee league table have their bases in the US. We might all talk about global investment banking, but it is still the US that really matters.
And who is the most important client for banks? In terms of fees paid over the past three years, it is another bailed-out business paying investment banks to remedy the mistakes its advisers helped it to make in the past. Step forward AIG, which has paid an average of $319 million a year to its advisers since 2009.
Given the turmoil many experts expect us to go through this year, there could be years of big fees ahead from the restructuring of other financial services companies. But if that is the best that bank advisers can hope for, then we are all in serious trouble.