Despite Covid-19, 2020 was a banner year for investment banking, with IPOs and bond issues standing out. Our headline for last year’s ranking of the World’s Best Investment Banks was “Epidemic Threatens Growth.” The pandemic had just begun. This year’s winners faced a once-in-a-century event and still maintained operations and market position while managing to strengthen their positions and revenue globally.
For the fourth year in a row, J.P. Morgan takes the top spot of Best Investment Bank globally and in North America, as well as global Best Equity Bank. Year over year, Morgan grew its share of investment banking revenue in all sectors (M&A, equity and debt capital markets, and syndicated loans) by 9%, or $8.5 billion, significantly higher than the previous year’s $6 billion.
As the dust from the Covid-19 pandemic and the economic crisis begins to settle, however, a reckoning may be in store even for the best performing banks—more so even than last year. McKinsey & Company, in its Global Banking Annual Review, notes that in the months and years to come, recovery will pose a two-stage problem for banks.
“First will come severe credit losses, likely through late 2021,” McKinsey writes. “Then, amid a muted global recovery, banks will face a profound challenge to ongoing operations that may persist beyond 2024. Depending on scenario, from $1.5 trillion to $4.7 trillion in cumulative revenue could be forgone.”
Against that backdrop, the investment banking industry will be transformed. Deloitte, in its Bank of 2030: The Future of Investment Banking report, says institutions “will transition from a full-scale service model to a bifurcation of two broker archetypes: ‘client capturers’ that specialize in front-office functions and ‘flow players’ that focus primarily on middle-office functions.” By shedding noncore assets, Deloitte argues, investment banks will become more-datacentric organizations that can better serve clients by modeling behavior using artificial intelligence, machine learning and natural language processing to predict activities and risk tolerances.
That said, the past year has seen plenty of expectations defied, and many subsectors and regions of the investment banking industry showed great strength.
According to data from Refinitiv, total global investment banking fees reached an all-time high. Debt and equity accounted for a large share of the growth in activity while equity-underwriting fees were up 78%. Fees were “bolstered by a resurgent market for IPOs [initial public offerings] and record follow-on and convertible bond issuance,” Refinitiv says.
Only two regions showed a decline in revenue […]
