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Eight important charts about the future of investment banking from McKinsey & Co.

Axe man

McKinsey & Co have a big new banking report out. It says banks are in a bad way, that they need to cut products, push electronic platforms, merge, cut headcount, cut pay etc.

These are the charts that give the report its backbone. Redundancies are clearly not over yet.

1. On average, banks have cut 1,000 front office staff each since 2010, but sticky costs elsewhere mean costs have risen as a percentage of income

Mckinsey 1

2. When costs are deducted, front office ‘producers’ aren’t really all that profitable

Mckinsey 2

3. The industry is back where it was eight years ago

Mckinsey 3

4. Europe and North America are still where it’s at

Mckinsey 4

5. Redundancies aren’t over yet 

Mckinsey 5


6. Pay for bankers is falling, while spending on operations and technology is increasing

Mckinsey 6

7. Margins are highest in DCM and compensation sucks profits in M&A

Mckinsey 7

8. By 2017, Asia will account for a greater share of banking revenues than North America 

Mckinsey 8

Comments (1)

  1. Not sure what is necessarily bad – A couple of points:

    – regulatory and capital costs are masking what are indeed very profitable businesses for the largest firms
    – these firms can’t rely on revenue growth, therefore they rely on tech spending, head-count reductions and managing down compensation for top earners to build earnings
    – the cartel-like market structure prevents any new entrant from competing
    – it has also allowed banks to manage down costs effectively (no competition for talent), it has stabilized pricing (no competition for clients), it will eventually result in a high margin, steady reliable income stream that might not double any time soon, but will be consistent – what does that sound like? The bank as a utility is coming true.

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