Investment banks will continue to curb trading amid falling profits

Revenues across top 10 investment banks continue to fall across fixed income and equities trading.

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.