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Barclays’ guide to what’s coming for investment banks in 2015

What Deutsche Bank discerns on the horizon

What Deutsche Bank discerns on the horizon

We’ve already chucked the gauntlet at your feet and suggested that 2015 might be a pretty good year for anyone seeking out a banking job. Now leading investment banks are following in our footsteps and issuing predictions of their own.

JPMorgan’s 2015 forecast for investment banks are out next week. In the meantime, we have a research note from banking analysts at Barclays. They’re also optimistic, sort of.

1. Barclays points out that another bad year would be unprecedented in the recent history of banking  

‘Since 1999, two down years in IB revenues have never been followed by a third,’ point out the analysts at Barclays. Given that 2012 and 2013 were both down years, they say this, ‘could bode well for the year ahead.’

2. Barclays analysts think 2015 will be a year of stasis for investment banking revenues 

This pretty much extends to 2016 too…

Investment banking revenues

3. If you work for a European investment bank, Barclays’ analysts think you’re better off with the French 

Barclays revenue growth forecasts

4. Although Standard Chartered is closing its equities business, Barclays thinks you’ll be best off in equities this year 

Barclays revenue growth by product

5. Overall, the positives outweigh the negatives 

While there are certainly gremlins in the shrubbery as we move into 2015, Barclays analysts’ think they’re outnumbered by the fairies in the trees. They list multiple reasons to be positive:

• The M&A cycle is finally picking up after 6 years of decline.
• Equity turnover after multiple years of decline seems to be bottoming out.
• Consensus IB revenue estimates for FY15 look rather unambitious.
• IB revenues are much less dependent on Eurozone macro or loan growth recovery.
• Divergent monetary policies may prompt hedging/trading demand in rates and FX.
• European IBs seem to be recouping some of their lost market share.
• Litigation pressures seem to be past the worst.
• Regulatory disruption to revenue generation looks to be easing.

They also list multiple reasons to be negative (listed below), but on balance think it will all be fine…

• The macro backdrop remains challenging, and is a dampener on the key confidence driven product areas (eg equity trading and M&A) and risk appetite more broadly.
• The equity market year-averaging effect is a small headwind to the value of transactions in 2015.
• US QE unwind, though heavily flagged, may disrupt some EM or high-yield markets further.
• RoE for the industry remains below par, and requires more business model reshaping.
• Despite some restructuring, industry capacity in core businesses has barely reduced.
• Some activities have shifted out of the perimeter of the major IBs (e.g. some commodity trading) representing a permanent diminution in the revenue pool.

 

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