Outlook for Global Wholesale and Investment Banking - BlackRock ...

March 16, 2010BanksExhibit 7Base case outlook for Equity Trading and IBDProductEquities cash&propEquityderivativesPrimeBrokerageTotal equitiesInvestmentBankingTotalunderlyingincome09e/08$32 BN+45%$21 BN+100%$14 BN-20%$66 BN+35%$56 BN+15%$315 BN+55%2009 performance drivers• Recovering equity markets driving sharplyimproving revenues in equities prop risktakingafter a disastrous 2008• Volumes on the client business moresubdued, particularly in h2• Bounce-back revenues from 2008, in partdue to the absence of losses write-ups in q1• Some genuine growth as margins remainedwide and volatility came in• Some recovery in retail structured products,but well below historic highs• Margins remained strong in prime financing,whilst capital outflows were contained in h1and then reversed in h2• Mixed results in synthetics / delta one• Equity issuance fees up 40% from 2008 dueto h2 activity, BRIC IPO’s and record incomefrom APAC• Debt issuance at pre-crisis levels due toextraordinary performance from IG and HYEuropean corporate bonds• M&A down 40% from 2008 due to lowestmarket activity since 200310e/09e$33 BN+5%$24BN+15%$15 BN+10%$73 BN+10%$57 BN+5%$280 BN-10-15%Source: Underlying data based on Oliver Wyman data. Forecasts triangulate Oliver Wyman and Morgan Stanley views2010 performance drivers• Exceptional growth in prop trading resultsunlikely to be repeated• Stabilisation of markets but volume growthlikely limited and trading conditions weaker• Significant potential for rebound and growth inretail investment products• Institutional demand (and supply) likely tocontinue to migrate away from complexity,whilst less volatile, flatter markets potentiallyalso a drag on flow• ECM-linked corporate/FIG opportunities• Financing margins likely to remain robust ascapital remains constrained• Hedge fund flows expected to remain positive• Challenges to synthetic and yieldenhancement business models• Incentives to lock-in low interest rates anddisintermediate constrained banking sectorlikely to continue to keep DCM issuance high• Recapitalisations also likely to continue aspricing improves and corporates and someFIGs continue to restructure balance sheets• Opportunistic M&A likely to return, with privateequity also likely to remerge as a theme8