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Investment banking: Darwinian capital markets

As they rapidly lose market share, investment banks must evolve their capital markets businesses.


“Absent a serious effort to amplify their strengths and address their weaknesses, it’s hard to imagine how investment banks will be able to sustain growth in an oversupplied, rapidly commoditizing and increasingly disintermediated industry.” 

Boston Consulting Group doesn’t pull any punches in its report on digital migration across the capital markets, published in May. 

The numbers certainly don’t look good. While the total capital markets revenue pool grew 7% in aggregate from 2016 to 2017, investment banks now capture only 33% of total revenue, down from 48% in 2006, according to BCG. Investment banking revenues declined for the fifth consecutive year in 2017, while securities services revenues posted strong growth of 7%. Global investment bank revenues declined by 3% in 2017, primarily the result of weakness in FICC, which fell by more than 9% to $105 billion. 

Analysis published by Dealogic in early April showed a 14% decrease in global investment banking revenue for the first quarter of this year, down to $18.4 billion from $21.3 billion in the first quarter of 2017. Revenue was down 17% year on year in the Americas, down 3% year on year in EMEA and down 9% in Asia Pacific.

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