Some of the largest industry players collapsed or were acquired
Los Angeles, CA (PRWEB) August 12, 2012
When the subprime crisis hit investment banking in late 2007, it caused billion-dollar losses for many major US and European banks. It also marked the beginning of a period of change for the Global Investment Banking and Brokerage industry in terms of regulation, consolidation and activities. Industry revenue is estimated to have plummeted by 36.1% in 2008, according to IBISWorld industry analyst Ee Jen Lee. Some of the largest industry players collapsed or were acquired by other companies. The major centers of investment banking activity, the United States and Europe, were most affected, while the banking systems of the Asia-Pacific region and developing economies were relatively unscathed.
“In 2009, the Global Investment Banking and Brokerage industry rebounded strongly, receiving a boost from strong performances in fixed income products trading and a surge in demand for transaction advisory services,” Lee says. However, industry revenue fell again in 2010 as equity capital market activity declined and fears about the world economy developed once more due to the threat of a Greek debt default. In 2011, persistent fears and the credit downgrading of Portugal and America rocked financial markets, which caused business and investor confidence to decline. This put a stop to many capital raisings and caused merger and acquisition activity to weaken. FICC trading income was also badly affected by the high degree of market volatility and the threat of debt defaults. Due to persistent weakness in the global economy, industry revenue is projected to grow at only 3.8% in 2012. Over the five years through 2012, industry revenue is forecast to decline by 3.7% per annum to $295.3 trillion, primarily due to the large declines in revenue suffered during the financial crisis.
Over the next five years, the industry will be shaped and constrained by a raft of new regulations in the United States and parts of Europe. The implementation of Basel III, the Volcker Rule and possibly recommendations from the Vickers Report will further scatter the operations of investment banks. Investment banks will shift resources away from risky activities into more stable fee-based activities. Growth will no longer reach the high double digits as experienced after the dot-com bubble. In the next five years, industry revenue is forecast to grow. Concentration in global investment banking activities increased over 2008, as a number of large investment banks fell prey to acquisition and bankruptcy. An early purchase was that of Bear Stearns by JP Morgan. In September 2008, Bank of America purchased Merrill Lynch and the UK bank Barclays purchased the US operations of Lehman Brothers. The Japanese brokerage Nomura Holdings purchased Lehman Brothers' Asian operations. For more information, visit IBISWorld’s Global Investment Banking & Brokerage industry report page.
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IBISWorld industry Report Key Topics
This industry covers investing banking and broking activities worldwide. Investment banking activities comprise corporate advisory services for mergers and acquisitions, corporate finance, and debt and equity underwriting services. It also includes trading activities both on behalf of clients or on the banks own account (principal trading). Trading occurs in fixed interest, currencies and commodities (FICCs), and equity products.
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Globalization & Trade
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