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Investment banking: Equity revenues may rise 20%

The equities business at leading investment banks is booming, according to a report from the Boston Consulting Group.

Revenues globally are expected to grow by 20% to 22% this year to reach $92.4 billion, up from $76.4 billion in 2006.

The boom is being driven by the strong performance of stock markets globally and the continued strength of leveraged buyout activity. The S&P 500 rose 13.6% in 2006, the Nikkei by 2.9% and the FTSE100 by 16.3%.

Global equity trading revenues, which suffered terribly during the bear market years that followed the dotcom bust in 2001, grew 40% in 2006 to reach a total of $767 billion.

Equity trading revenues, boosted by equity derivatives activities, which are expected to grow by 15%, are expected to grow by a further 26% in 2007, outpacing the growth in equity trading volumes globally, which are projected to grow at a comparatively modest 17%.

Proprietary trading revenues are expected to add $10.5 billion to equity revenues in 2007, up 15% from 2006.

Global investment banking pre-tax profits

Source: Boston Consulting Group

The potential to earn higher returns from investments than advisory work has made proprietary trading more attractive to investment banks.

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