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Investment banking: A whole new ball game

At long last, investment bankers are bowing to the inevitable. Four years after the crisis, the industry is undergoing a much-needed transformation, as banks exit businesses they simply cannot make a return on. Bank chiefs are struggling to adapt to the new rules of the game. It should lead to an era of greater specialization and further consolidation.

Over dinner, the conversation turns to the future of investment banking. The European head of one global firm looks tired, and a little resigned. "This business is changing faster than anyone realizes," he says. "We’re moving to an era of specialization, one where there are very few true global players offering a full suite of investment banking services." He declines to add if he expects his firm to be one of them.

The global head of securities at a rival firm takes up the theme: "This is good news. At last, capacity is coming out of the industry. In a couple of years’ time, the outlook for firms like ours will be much healthier." He adds: "But of course, we need to get through the next two years first."

For more than four years, the global investment banking industry has railed against the inevitable. There are simply too many banks offering too many products and services to survive in the new, client-driven model that has been forced upon them.

Now, suddenly, that is changing. Over the past three months almost half of the leading 20 global firms have announced plans to exit what were core business lines.

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