Market view | Investment banking
and the question is how they are going to do that economically. There is a lot of navel gazing going on but they have to start making the diffi cult decisions and focus on their core strengths while exiting the weaker areas.” The main challenges according to a report by
J.P. Morgan entitled Global Investment Banks: IB landscape changes across the globe – the path to an acceptable ROE for Tier I and II players is that there is little chance of the industry returning to the growth levels of the halcyon 2005 to 2006 period plus the scope for product innovation is limited. Moreover, banks should not rely on emerging markets as the engine because they are not expected to be a material driver for revenues over the next fi ve years. As a result, banks need to rethink their value
propositions. “One of the key drivers behind the restructuring are the low volumes in the market and banks are going back to what they specialise in whether it be equities, fi xed income or a specifi c area of expertise,” says Tony Nash, head of execution services at Espirito Santo. “Some are paring down their global ambitions and are focusing on a particular region while others are combining different skill sets on one trading desk such as electronic trading and programme trading.
38
In general, banks are reining in their ambitions and are in a survival mode.” Those that do will more than survive and in time could thrive. As Bradlaw points out, “What’s new in the battle for market supremacy is that by and large the fi ght has shifted from breadth of product coverage and inter-bank trading to a greater focus on corporate needs, home market supremacy, consolidation and optimisation of post-trade functions. This paradigm shift has and will have a substantial impact on market liquidity, cost of trade and corporate governance and heads of investment banks need to take a more holistic approach in securing transactional volumes and returns”.
Bradlaw adds, “In this shift there will be winners and losers. Mid-tier banks who have aspired to be recognised as global players will focus on national markets while the top six to seven global players will dominate even more as smaller fi rms withdraw from certain asset classes or investment banking activity completely. In addition, investment and corporate banking groups will need to work more closely together so that new cross products can emerge which are outside of regulatory oversight and capital demands – but in effect with the same underlying hedge/investment effect. ■
Best Execution | Autumn 2012
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84