World’s five largest banks see investment banking revenue slide to USD26.1bn in 2019

Dollar decline

Trade tensions, slow growth, and low-interest rates all left their mark on the world’s largest banks last year, affecting the investment banking revenue they racked up.

The five largest global banks hit USD26.1bn in investment banking revenue in 2019, 3 per cent down on the year, according to data gathered by LearnBonds. JP Morgan, ranked as the world’s largest bank, made almost USD6.9bn profit from investment banking last year.

The keyrole of an investment bank is to help companies and governments raise capital from investors, such as pension funds or other money managers. The banks take the role of underwriter, making sure that bonds or stocks are competitively priced and sold. Investment bankers also help clients manage mergers and acquisitions.

In 2019, the twelve largest US and European banks generated USD77.5bn from investment banking, or USD3 billion less compared to the previous year, revealed the Wall Street Journal and Dealogic data.

As market leader, JP Morgan gained 8.9 per cent market share, a 0.3 per cent rise compared to the year before. But investment banking income at the US giant dipped by more than USD50 million between 2018 to 2019.

Although the revenues of the world’s top investment banks plunged to a 13-year low in the first half of 2019, JP Morgan still managed to produce record income in the fourth quarter. The record earnings at the end of the last year were driven by the bond trading revenue, which surged 86 per cent to USD3.4 billion, surpassing the USD2.6 billion estimate by roughly USD800m.

Chief Executive Officer of the JP Morgan, Jamie Dimon, says: “JP Morgan Chase produced strong results in the fourth quarter of 2019, capping off a solid year for the firm where we achieved many records, including record revenue and net income.

While we face a continued high level of complex geopolitical issues, global growth stabilised, albeit at a lower level and resolution of some trade issues helped support client and market activity towards the end of the year.”

Goldman Sachs, the second-largest investment bank in the world, ended 2019 with USD5.8 billion in investment banking revenue and a 7.5 per cent market share. Compared to a strong 2018, the Wall Street institution suffered a near 7 per cent slide in revenue from investment banking services. This fall reflected lower earrings in underwriting and financial advisory, partially offset by higher revenues in corporate lending during 2019.

However, the bank ended the year with USD36.6 billion in overall net revenues, including the fourth-quarter revenues of USD10 billion, its highest quarter since 2007.

Goldman Sachs chairman and chief executive David Solomon says: “Strong performance in the fourth quarter helped us to deliver solid results for the year while continuing to invest in new businesses. We aim to drive higher returns in the future.”

Behind the two leading banks, Morgan Stanley and Bank of America ranked third and fourth with revenues of around USD4.8 billion and USD4.7 billion in 2019, respectively. Citigroup took fifth place on this list, with USD3.8 billion of revenue last year.

The 2019 data show the five leading US investment banks generated one-third of total investment banking revenue in the last year, holding a market share of more than 33 per cent. The position of American banks in this area has been strengthened as a host of European banks - such as Deutsche Bank, Royal Bank of Scotland and UBS - have withdrawn from investment banking after suffering crippling losses in the 2008 financial crisis.

Analysed by sector, financial institutions represent the leading field for investment banking services in 2019 with USD16 billion in revenue. Technology and Energy and Natural resources followed with USD11.3 billion and USD9.7 billion profit, respectively. The statistics indicate that JP Morgan was the leading bank in seven out of ten investment banking sectors. Goldman Sachs ranked as the leading investment banking service provider in the fields of technology, business services, and transport.
 

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