European investment banks are having a tough time. In the U.S. they're suffering as a result of new 'Foreign Banking Organisation' rules requiring that U.S. subsidiaries are capitalised more heavily. In Europe, American banks are eating their dinner.
European banks' loss of market share in their home territory is laid bare in the charts below, from U.S. boutique M&A advisory firm Freeman & Co. For year-to-date 2013, U.S. banks' share of European investment banking fees is 26.6%. This is up from 21.9% for 2012 and 20.3% in 2010. Freeman's figures cover M&A advisory, bond and equity underwriting, and syndicated loan arrangement fees. They don't cover sales and trading revenues.
Freeman & Co. identify several factors driving U.S. banks' resurgence. They include higher inbound cross-border M&A activity, European universal banks' retreat from emerging Europe, and U.S banks' strong fixed income distribution capabilities - which are helping them to win share in the leveraged lending market.
Not all U.S. investment banks are wining market share equally, however. And not all European investment banks are losing share to the same degree. As the charts below show, the big winners in Europe so far this year have been Goldman Sachs (a 31% increase in market share), Citi (a 29% increase in market share) and Bank of America Merrill Lynch (a 21% increase in market share). The big losers have been RBS (a 19% decline in market share), UBS (an 18% decline in market share) and Barclays (a 13% decline in market share).
Some European houses have bucked the trend. Deutsche Bank, Credit Agricole, SocGen and Unicredit have all increased their share of investment banking fees this year – albeit with all but Deutsche growing from a low base.
Market share of the top 15 investment banks in EMEA 2008-2013
Source: Freeman & Co.
The real question is whether U.S. banks are on a roll and will continue seizing market share in future. They certainly have the benefit of a fast-growing domestic market as a platform for international expansionism. And as the chart below - also from Freeman, shows, U.S. banks were much stronger in Europe in the past - recent gains in market share could merely be the reassertion of the old order.
Source: Freeman & Co.