Big US and European investment banks face another quarter of weak revenue and further job cuts in their advisory and underwriting operations.
Advisory and capital markets underwriting revenues for most in the sector have declined since early 2022, dropping to a seven-year low in the first quarter of 2023. Nine out of 13 investment banks tracked by S&P Global Market Intelligence reported year-over-year revenue drops for the first quarter.
Revenue is unlikely to have rebounded in the second quarter as market activity is subdued, senior bank executives said.
"The wallet is down about 25% year over year, and we're likely to be in line with the wallet," Citigroup Inc. CFO Mark Mason said of the second-quarter revenue outlook at a conference June 14.
While Deutsche Bank AG's second-quarter revenues in advisory and underwriting are expected to be flat or above the prior-year level, recovery of the wider industry wallet is yet to come, CFO James von Moltke said at another conference June 15. April was "extremely quiet" after the market turmoil in March, with activity picking up later in the second quarter, von Moltke said.
The comments are backed by the latest market data, which shows the global investment banking revenue pool far below the prior-year level with less than ten days to the end of June.
Industry revenues year-to-date total $30.4 billion, compared to $42 billion in the same period of 2022, Dealogic data presented by The Wall Street Journal shows. Industry revenues for the period April 1 to June 22 were $13.3 billion, compared to $19.3 billion booked for the second quarter of 2022.
– Access a segment analysis for Deutsche Bank.
– Read about the outlook for UBS' investment bank post-Credit Suisse merger.
Staff cuts
Falling revenue has prompted staff cuts across advisory and underwriting teams. Banks want to balance productivity levels following a hiring spree in 2021, when the post-pandemic reopening brought record levels of activity and led to a boom in investment banking revenues.
Major Wall Street groups including Citigroup, Goldman Sachs Group Inc. and Morgan Stanley lead the headcount-reduction push with thousands of job cuts announced for this year, most of which are in investment banking.
Citigroup's Mason said the bank will cut 5,000 jobs, mostly in investment banking and trading, by the end of the second quarter. Based on announced plans so far, job cuts at major US investment banks could exceed 11,000 in 2023, the Financial Times estimated in a June 16 report.
JPMorgan Chase & Co. cut 20 dealmaker jobs in Asia, Reuters reported June 21. In Europe, UK-based group Barclays PLC has reportedly cut about 300 investment banking jobs since November 2022, with the latest round of 100 job cuts announced in April, Sky News reported.
Barclays declined to comment. JPMorgan Chase did not respond to a request for comment.
The merger of Credit Suisse Group AG with UBS Group AG will also trigger thousands of staff cuts. Most of Credit Suisse's 17,000 investment bankers are expected to lose their jobs as UBS restructures its troubled peer.
Hopes of recovery
There are early signs of a rebound as advisory and capital markets underwriting revenues have started to stabilize on a quarter-over-quarter basis, Deutsche Bank's von Moltke said June 15.
"I certainly believe that we'll start to see sequential increases in the [revenue] wallet and activity generally," the CFO said.
Six out of the 13 global banks tracked by Market Intelligence posted quarter-over-quarter growth in their total investment banking revenues for the first three months of 2023. Among the banks that provide separate results for the divisions, most booked sequential increases in capital markets underwriting revenues but declines in advisory revenues, the data shows.
