As recently as 2009, banks’ investment fees were higher in Europe than in the United States. Nowadays, Europe is delivering only about a quarter of total investment activity, with the corresponding collapse in fee income.
Mergers and Acquisitions (M&A) used to be the investment banker’s bread and butter but nowadays, European bankers appear to be either dozing at the wheel or they’ve left the building! Or perhaps they’ve forgotten how to do it!
In the last year American acquisitions were up by about a third whereas in Europe, they appeared to be too busy sitting on their cash, playing the markets and endlessly “rebuilding balance sheets”.
Before the 2007 crisis, the European dealmaking level was about three times as high as today. In the last year, only about $750 billion in deals was announced. Six years ago, it was over 2 TRILLION!
Europe’s global share of M&A activity is now less than one third – the lowest in 10 years. In fact NINE OUT OF TEN of the largest deals in the last 12 months have been executed by US teams.
Equity Capital Markets are showing the same trend.
In EMEA (Europe Middle East and Africa), issuance (offering securities in order to raise funds) over the last 12 months has been about $145 billion. That is well down on last year. Compare that to an increase of nearly 50% in the USA!
Even Asia has overtaken EMEA which is now delivering only about 20% of global issuance. As recently as five years ago, it was nearly 40%.
The conclusion? European Corporates are waiting (they do have cash) and the banks have become lazy and preoccupied with their political debt games.
So what are the politicians doing to make the banks on this side of the Atlantic more profitable? Very little.
Unsurprisingly, subsidiarisation (breaking up or threatening to break up banks), “ringfencing”, bonus caps and financial transaction taxes are all serving to make Europe a structurally much less profitable region.
You see, the banks too are being made to suffer their own kind of austerity by the politicians.
Add to all that the 2013 craze of blatantly robbing bank depositors and the outlook continues to feel depressingly negative.