As per the rating agency Moody’s report, it downgrades the general outlook on the investment banking sector, stating further that the profitability “would have peaked up for the current economic cycle.”
According to the rating agency Moddy’s Investors Service report, the global slump down in the economic growth is pointing out that nothing looks rosy especially in pursuit of global investment bankers over the next 12 to 18 months.
According to the report, Moody’s completely changed perception of global investment banks (GIBs) to stable from positive, citing a moderate global economic growth that has led to lower levels of client activity. As well as the lower-or as well the negative – interest rates also adds out to the revenue pressures mounting up.
Ana Arsov, Moody’s Managing Director, stated that “the stable outlook on the global investment banks reflects their expectations that the profitability amongst GIBs has peaked in up during this economic cycle.” She also added that the “greater revenue headwinds as well would make profitability gains furthermore incomprehensible, despite having a thorough focus on business re-engineering and technology investments to boost efficiency.”
Amidst escalating trade and geopolitical tensions, Moody’s predicts that the slower global economic growth for this year, as well as the following year, would be a bit threatening. As well as it is stated that most of the G20 nations have “very diminished monetary and fiscal policy space for stimulating global aggregate demand.”
The rating agency as well stated that despite the prevailing uncertainty over lower interest rates, the investment banks face a “modestly” higher percentage of credit costs due to surged levels of leverage but most bank balance sheets remained strong.
According to a Deals Intelligence, the number of fees that are being earned by the investment banks, etc. have fallen by about 9 percent year on year during last 12 months on August 22nd to $62.9 billion (Dh231.1bn).
As per the data records of the report, the Global Banks have witnessed a slump down in mergers and acquisitions activity that has fallen 13 percent to $2.48 trillion. Although, there is a definite fact that the global debt issuance has surged up to 7 percent to a little above $5tn, the negative aspect is that syndicated loan issuance has dropped 23 percent to $2.3tn, and the global IPO market has seen a deceleration to about one-third, with $84.55bn being raised during the period.
With around 6.6 percent share on all investment banking fees earned during this year, JP Morgan tops the list of global investment banks closely followed by Goldman Sachs at 6 percent share and Bank of America Merrill Lynch in the third position with 5.2 percent.
The major US investment banks have surpassed their European rivals, several of whom have dealt in pressures because of lower interest rates and more challenging economic surroundings. Deutsche Bank last month declared a major restructure beneath that it’ll shed regarding 18,000 jobs because the investor shrinks its investment bank, exits business lines like equities that trade in to specialize in group action business.
Swiss bank UBS is additionally reported to be considering a restructure on its own, and therefore, The Wall Street Journal reported that each bank command talks in June a few mergers, however, couldn’t agree on terms.