The super-league breaks away. (investment banks: the seven largest)
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The super-league breaks away. (investment banks: the seven largest)


The future of the middle-sized US investment banks looks bleak. They are falling behind the top seven houses, in terms of profits, market share and innovation. Some are straining to catch up; some are giving up the race, and becoming niche players; others are keeping up the appearance of being full-service houses, while steadily losing market share and their best investment bankers.

The concentration of power in the hands of the big boys is not new. What is new is the acceleration. Last year, the top seven houses -- Salomon Brothers, First Boston, Goldman Sachs, Drexel Burnham, Merrill Lynch, Morgan Stanley and Shearson Lehman -- had an 85% share of the primary debt market. But their share of the same market in the first quarter of 1986 was 91.5%, and the market itself was 50% larger than in the corresponding period last year.

The concentration is most marked in the primary bond market, but its growing in all the arenas where the investment banks compete. In mergers and acquisitions, in CMOs, in municipal bonds, in junk bonds, in government bonds, in foreign securities, in the secondary markets, in swaps, it is almost invariably the same six or seven banks which lead the field.

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