The global investment banking (IB) industry faces major challenges. IB recovered well in the first quarter of 2012 compared with Q4 2011: industry earnings worldwide doubled to EUR 80 billion (Q1/2012).
But euro and sovereign debt crisis in some European countries are casting shadows on its future. IB earnings could be down by up to 15% in 2012 compared to the year before. Return on equity (ROE), which already tailed off badly in 2011, could fall as far as 5% in 2012.
To find a way out of this earnings squeeze, smaller banks need to focus more on specific products and markets. The wash of excess capacity means numbers can only keep thinning: around 15% of the 500,000 jobs in the industry could disappear in the next five years. Larger financial institutions need to shift their medium-term business strategies towards Asia.
The report is available to download from the Roland Berger website.