Investment bank revenues to fall for fourth straight year

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Revenue across top banks’ investment banking and sales and trading divisions was up 14% in the third quarter from the same period last year, at $ 40.4 billion, according to Coalition data. That compares with revenue for the first half that was 15% lower than a year earlier.

But underperformance in traditional investment banking and equities sales and trading has kept a lid on revenue growth.

To that end, the Coalition forecast for full-year revenue across the banks it analysed is $ 152.2 billion, down 5% on the 2015 total, which in turn had fallen 3% from the year before that. Year-to-date revenues are 7% lower at $ 119.6 billion.

Breaking down the issues, a “sharp decline” in equity capital markets revenues and “reduced M&A activity” dampened the performance of investment banking divisions, Coalition’s analysts said. Dealmaking has been hit by “political instability around the globe”. And reduced IPO and follow-on activity is particularly noticeable in Europe, the Middle East and Africa.

In equities, derivatives and cash remained weak, the data shows, although the Americas remained more resilient than Emea or Asia Pacific.

Many banks delivered impressive growth in their third-quarter revenues from fixed income, currencies and commodities sales and trading. Volatility sparked by the US election result spells good news for those desks going into the fourth quarter, analysts have said.

The best news for bankers may be that the pace of job cuts in the front office has slowed during the past two quarters, according to Coalition, with the steepest cuts in the third quarter coming in FICC divisions while and IBD jobs remained stable.

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