Global investment banking revenue drops to lowest since 2012

Surge in outbound deals bolsters revenue generated from China market, says Dealogic report

PUBLISHED : Sunday, 22 January, 2017, 8:15pm
UPDATED : Sunday, 22 January, 2017, 9:35pm

Global investment banking revenue declined for the second consecutive year in 2016 and fell to the lowest level since 2012, while revenue generated from the China market hit a record on the back of a flurry of outbound merger and acquisition (M&A) deals, data from Dealogic shows.

Global investment banking revenue declined 4 per cent to US$74.3 billion (HK$576.42 billion) in 2016, the lowest level after 2012’s US$69.1 billion.

On the other hand, Asia-Pacific investment banking revenue hit a record breaking US$16.2 billion in 2016, surpassing the previous high of US$15.9 billion in 2010. revenue from China soared to US$8.9 billion, thanks to the continued offshore buying spree by Chinese companies, while Japan revenue at US$2.8 billion was the lowest in eight years since it reached US$2.7 billion in 2008.

The decline in global investment banking revenue was driven by equity markets, which went down 25 per cent from 2015 to US$14 billion, marking the second lowest annual total since 2003, behind 2012. Merger and acquisition revenue remained on par with 2015, whilst revenue from debt markets and loans increased 7 per cent and 5 per cent, respectively.

Goldman Sachs’ job cuts show investment banking has become a low margin business

European investment banking revenue stood at US$16.2 billion in 2016, the second lowest level in 13 years in 2016, behind US$16.1 billion in 2012. While UK investment banking revenue fell 6 per cent year‐on‐year to US$4 billion, it accounted for a 25 per cent share of European investment banking, the highest share since the financial crisis.

Although China’s regulators have strengthened their scrutiny of outbound merger and acquisition activity and tightened checks on capital outflows in a bid to curb yuan depreciation and a draining of foreign reserves pool, the outbound buy out spree led by Chinese companies continue.

Last Tuesday, China’s aviation conglomerate HNA Group became a major shareholder of New York’s SkyBridge Capital, a hedge funds business worth US$12 billion, according to media reports.

The news was announced by Anthony Scaramucci, founder of SkyBridge, who is exiting the company to join US President Donald Trump’s administration as an adviser.

China’s HNA Group buys Hilton stake from Blackstone

HNA made more than US$20 billion of acquisitions in 2016, including its US$6.5 billion acquisition of a roughly 25 per cent stake in Hilton Worldwide Holdings from Blackstone Group.

Last Thursday, another Chinese conglomerate China Oceanwide Holdings Group and IDG Capital, an investment management firm announced it would acquire International Data Group, the owner of PCWorld magazine and market researcher International Data Corporation. Beijing-based Oceanwide pledged US$3.8 billion to take control of US insurer Genworth Financial in 2016.

The 2016 global investment banking revenue rankings was led by JPMorgan, which topped the table with an 8 per cent market share. Goldman Sachs and Bank of America Merrill Lynch followed, with 6.6 per cent and 6 per cent, respectively.