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European banks’ league-table loss is investor win

LONDON (The Southern African Times) – Even in a record year, dealmakers at European investment banks still lost market share in their home region. Yet chief executives like Credit Suisse’s Thomas Gottstein and C.S. Venkatakrishnan at Barclays shouldn’t be too concerned. Going toe-to-toe with U.S. behemoths like JPMorgan is costly and futile. Better to focus on a few important niches.

Investment bankers earned a record $20 billion in fees from arranging mergers, acquisitions and share offerings in Europe, the Middle East and Africa last year, Refinitiv data shows.

But a growing proportion went to the big American firms. JPMorgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America grabbed 31% of fees in EMEA in 2021, up from 26% in 2019, the last full year before the pandemic. Meanwhile, the six biggest Europeans – BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, HSBC, and UBS – together took home just 12% of the pie, down from 13% in 2019. As recently as 2010, the Americans and Europeans were roughly level in EMEA.

American banks have a vast and highly profitable home business, giving them a broader suite of products and more capital to offer deal-hungry clients. Their global reach also appeals to internationally minded European CEOs. If Revolut goes public this year, expect Goldman and Morgan to be involved. The pair just handled the $40 billion Wall Street listing of Latin American peer Nubank, giving them insight into how investors will look at the $33 billion UK-based digital bank. Goldman and Morgan also advised money changer Wise on its recent direct listing in London, having previously arranged similar New York debuts for Spotify Technology and Slack Technologies.

When it comes to offering advice on mergers, meanwhile, low-returning European banks struggle to match the salaries rainmakers can earn at U.S. firms or boutiques like Robey Warshaw, Centerview Partners, Evercore and others.

It follows that European banks should focus on strengths that fit their strategy. For UBS and Credit Suisse, that means deals involving wealthy controlling shareholders who may also be private-banking clients. Deutsche, with its huge German balance sheet, earns most of its fees from arranging loans and bond issues. There’s little chance of European bank CEOs clawing their way back up the league table. Investors will thank them for embracing the trend, rather than fighting it.

– Investment banks’ deal advisory and equity capital markets units earned $20 billion of fees in Europe, the Middle East and Africa in 2021, according to Refinitiv data.

    – That compared with roughly $14 billion in both 2020 and 2019. The businesses involve advising on mergers and acquisitions and arranging equity offerings.

 Just under 31% of those fees went to the big five American banks – JPMorgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America. That was up from 28% in 2020 and 26% in 2019.

    – The six major Europe-based lenders – BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, HSBC and UBS – collectively took 12% of the total, compared with 13% in both 2020 and 2019.

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