Investment Banking Outlook Summer 2012 (PDF ... - Roland Berger

Our theses in a nutshell
> Global investment banking revenues continue their roller coaster ride. After a soft second
half of 2011, they strongly rebounded in the first quarter of 2012. We project a weaker
Q2 with full year revenues in the EUR 200-260 bn range, depending on how the sovereign
debt crisis in Europe unfolds.
> Performance strongly differed both within and among peer groups: Global universal
players with a higher focus on the fixed income business on average outperformed
investment banks with a lower focus on fixed income. Many midsized and smaller players
in developed markets came under pressure. At the same time many peers in emerging
markets roared full steam ahead.
> Even though these trends reflect structural changes such as revenue shifting to emerging
markets and new regulations such as Basel 2.5/3, they are also harbingers of the squeeze
that investment banks are going to face. Unless banks make major changes to their
business models, their Return on Equity is likely to remain in single digits and many
peers underperforming today may see their economic model even more challenged
over the next 3 to 5 years.
> Fixing individual and industry economics will not come easy. Even with rounds of
productivity measures, structural overcapacity still largely exists. We believe that around
75,000 jobs and one third of industry risk taking capability are still on the line. Value
chains, therefore, will undergo transformation and true exits – which we have hardly
seen so far – will be inevitable over the next 3 to 5 years.
> We think that now is the time for banks to step decisively up to this challenge to reap
early mover benefits by a bespoke mix of swiftly implementing sustainable models,
capturing growth opportunities mainly in emerging markets, and in some cases position
themselves as a solution provider for those players who need to consequently refocus
their value chains to survive.