Investment banks' trading share to shrink further: CapGemini
Investment banks are set to further reduce trading activity in 2017, amid "tighter regulation and declining liquidity", according to a report from CapGemini. The study revealed revenues of the top 10 banks fell by 15% YoY in H1 2016, and investment banking divisions were the hardest hit with a 20% drop in revenue. The report also said the establishments are looking to "redefine and simplify business models", and are pivoting to advisory and underwriting functions, where higher returns are expected.
The investment banking industry will continue to reduce trading activity in 2017 as regulatory restrictions tighten profits, according to a report on capital market trends.

The report - authored by Capgemini - revealed revenues across the top 10 global banks in the first six month of 2016 plummeted 15% compared to the same period in 2015.

Revenues fell 11% across fixed income, 18% in equities and 20% in investment banking business divisions.

The decline in revenues and consistently low returns on equity have prompted a shift in investment banking business models, as trading activities are phased-out as part of cost-saving initiatives.

Capgemini explained investment banks are moving away from capital-intensive fixed income trading, toward advisory and underwriting functions that provide higher margins.

In December, Deutsche Bank revealed approximately 3,400 clients from its global markets business in fixed income and equities sales trading were to be cut off.

The move was part of a wider cost-saving strategy, in which Deutsche Bank explained, “approximately 30% of clients produce 80% of the revenues in these business divisions.”

The bank is aiming to save €3.8 billion by 2018 through restructuring and severance costs of between €3 billion and €3.5 billion.

Capgemini concluded 2017 will see investment banks continue to redefine and simplify business models amid tighter regulation and declining liquidity.