Going up against US rivals gaining market share in EMEA is costly and futile
Even in a record year, European investment bank dealers have lost market share in their region. However, CEOs such as Credit Suisse’s Thomas Gottstein and Barclays’ CS Venkatakrishnan shouldn’t worry too much. Taking on US giants like JP Morgan is costly and pointless. It is better to focus on a few important niches.
Investment bankers earned a record $20 billion in fees last year for organizing mergers, acquisitions and share offerings in Europe, the Middle East and Africa (EMEA), according to Refinitiv data.
But an increasing proportion went to big US firms. JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America accounted for 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 just 12% of the pie, down from 13% in 2019. Until 2010, Americans and Europeans were more or less equal in EMEA.
US banks have a vast and highly profitable domestic business, giving them a broader set of products and more capital to offer trading-hungry customers. Its global reach also attracts internationally minded European CEOs. If neobank Revolut goes public this year, expect Goldman and Morgan to get involved. The pair have just managed the $40bn IPO of their Latin American counterpart Nubank, letting them know how UK-based Revolut, worth $33bn, will view investors. Goldman and Morgan have also advised currency exchange Wise on its recent direct listing in London, having arranged similar New York debuts for Spotify and Slack.
When it comes to offering merger advice, European banks and their low returns have a hard time matching the salaries that corporate operations wizards at US firms or boutiques like Robey Warshaw, Centerview Partners, Evercore and others can earn. .
It follows that European banks need to focus on strengths that fit their strategy. For UBS and Credit Suisse, that means deals involving wealthy majority shareholders who may also be private banking clients. Deutsche, with its huge German balance sheet, gets most of its fees from arranging loans and bond issues. There is little chance of European bank CEOs moving up the league table again. Investors will thank you for embracing the trend, rather than fighting it.