Fees in investment banking sector across the world declined 29% during the first three-month period of 2016 as uncertainty in the global market halted deal proposing activities and other investment events. Global banking fees for services like capital markets underwriting and merger & acquisitions consultative services was $16.2 billion at the end of March, marking the lowest quarter since 2009.
Regional fees in the US amounted to $8.7 billion, a decrease of 32% from the previous year. Investment banking charges in Europe declined 27% to $3.9 billion while fees in the Asia-Pacific region dropped 18% to $2.6 billion. Profits in the investment banking sector were hurt by volatility in the global market coupled with other factors like sluggish Chinese economy and geopolitical worries surrounding the Middle East countries, THE ECONOMIC TIMES quoted a data from Thomson Reuters.
Among other sectors, fees in equity capital markets witnessed the sharpest fall of 48%, tailed by an 18% decline in mergers & acquisitions income and a 26% decrease in debt capital markets revenue. JPMorgan outstripped other players in the global fees league table, pulling in $1.2 billion in the first quarter of 2016, a fall of 23% from the previous year, but managed to get the lion share in the industry. Europe banks like Barclays and Credit Suisse followed the US banks in the rating rally, winning the sixth and seventh place respectively.
Investment banks across the globe are experiencing a new industrial revolution, according to the consultancy company GreySpark. The digital hurdle, similar to the industrial revolution, will convert banks into more reliable producers of financial services and products with lenient business rules, GreySpark noted.
The consultancy firm wants banks to adopt the business versions of aircraft and automotive manufacturing sectors - the two sectors that are impacted by measures direct government policies, regulation, demand and need to stock resources in order to modernise. GreySpark expects banks to set up a fully-automated manufacturing unit to create and assemble financial services and products. In addition, the firm requires banks to create distribution franchise to enrich relationship with its clients, as reported by Finextra.
According to Sonoran Weekly Review, few US banks like Bank of America and JPMorgan Chase are anticipated to report a lower earnings in the first quarter of 2016. Analysts predict a decline in quarterly adjusted earnings for banks with a high focus on areas of investment banking and capital markets. The average analysts estimate the banks like Wells Fargo, Bank of America, JPMorgan and Citigroup to report a year-on-year drop in quarterly adjusted profits.
While banks like Goldman Sachs and Morgan Stanley are anticipated to record a year-on-year fall in adjusted earnings per share. RBC Capital Markets predicts overall banking industry to register an average income growth of 1.8%. Like other sectors, the banking industry also faces serious challenges in the global market. The industry is attempting to implement various business adjustments to overcome global hurdles.
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