Asia leads investment banking fee growth over decade
In the past decade, banks in Asia have seen the most aggressive growth in investment banking fees, followed by those in the US. Meanwhile, Europe lags behind, as Kat Van Hoof reports.
In the decade since the 2007-08 financial crisis, investment banking fees across the globe have grown at very different rates of acceleration, as shown by data from Refinitiv.
Asian banks come out best in class in terms of fee earnings growth – fuelled largely by a huge boom in investment banking activity in China. On average, the fee pool swelled by 13% annually for the region’s banks. Unlike their peers in Europe and the US, they have seen fees increase in the first half of 2019 by 3% to $11.4bn.
The Americas is undoubtedly the leading region in the world in terms of investment banking fees, and since the financial crisis 10 years ago, the fee pool has only grown larger, at an average annual growth rate of 5%. It is estimated that US banks have raked in $25.5bn in the first six months of 2019. However, growth is not on the same trajectory, and though the US has nearly doubled the fee pool of European banks, the total is 12% lower than it was in the first half of 2018.
Meanwhile, at European banks, fees have on the whole remained steady at around $25bn to $30bn every year between 2008 and 2018. This translates to an average annual growth rate of just 1% over the same period. It does not look like 2019 will do much to improve this statistic: in the first half of the year, Refinitiv estimates that at $13.3bn, fees are down 14% on the same period in 2018.
For reference, in the first half of 2008 Asian banks made less than $4bn from fees, compared with the $15bn and $19.5bn made by banks in Eurpe and the Americas, respectively. Now, Asia is nipping at the heels of European institutions and may well overtake them in the next few years.
Focusing on fees gathered in the first half of the year, the global pool has taken a hit in 2019. Though they are down by 9% on the first two quarters of 2018, Refinitiv estimates global IB fees for the first half of 2019 come to $50.5bn, marking only the fifth time fees have topped $50bn since its records began in 2000.
The weighting of the various regions in this global fee pool has shifted over the past 10 years. The Americas has remained relatively steady over the past decade, hovering around a 50% slice of the global IB fee pool. But Asia has stormed up the ladder by nearly doubling its 12% slice of the pie in the first half of 2009 to a 23% share of the global fee pool in the first half of 2019. European banks, conversely, have seen their cut shrink from 39% to 26% over the same period.
Data shows that European banks are losing fee market share not only domestically (-5% in 10 years), but also in Asia (-7%) and in the US (-4%). Asian banks are the only ones to have increased their market share in all three regions.
