Once upon a time, people used to talk about "bulge bracket investment banks." Now it's more normal to talk terms of banks that are tier one, tier two, or tier three - but which is which? And do you work for a top tier bank or something more diminutive? Today's release from research firm Coalition answers all these questions and more.
The tier one global investment banks: J.P. Morgan, Goldman Sachs, Citi, Morgan Stanley, Bank of America Merrill Lynch (in that order)
If we take tier one investment banks to mean banks which are global leaders in most product categories, there aren't many. As the Coalition chart below shows, there's only really one: J.P. Morgan. J.P. Morgan ranks first or second globally across all product areas (credit and municipal finance excepted). As the regional charts at the bottom of the page show, J.P. Morgan is also strong across markets in the U.S., Europe and EMEA.
This time last year, Citi was the second most high ranked bank in Coalition's global chart. However, Citi has now retreated to third place, leaving Goldman Sachs second. With the exception of rates and commodities, however, Goldman's FICC business is generally worse ranked than Citi's. Meanwhile, Morgan Stanley is only really strong in equities and Bank of America Merrill Lynch is only a world leader in credit, securitization, municipal finance and debt capital markets.
The tier two investment banks: Deutsche, Barclays, Credit Suisse, HSBC, UBS
While you have a strong chance of working for a top tier business at J.P. Morgan and a strongish chance if you choose carefully at other U.S. banks, you're probably not working for a world leading franchise at a European.
For all its struggles, Deutsche Bank is still the strongest European bank globally. It's first globally for credit trading (up from second in 2017) and third for G10 FX. It's a big player in investment banking and fixed income and commodities trading (FICC) in Europe and is biggish in FICC in America. Deutsche's problem is the U.S..
By comparison, Barclays, UBS Credit Suisse lack top slots globally in any products, but broadly rank in the top four to six for most of them. HSBC is big globally for G10 FX and macro trading, and is predictably strong in Asia but lacks a real presence in the U.S. Barclays' investment bank has been stronger in the U.S. than Europe the Middle East and Africa (EMEA) ever since it acquired Lehman Brothers, but its EMEA investment banking division has gained ground after heavy investment. Credit Suisse and UBS both look like also-rans in every market.
Beyond the first and second tiers things get a bit more complicated. Just because a bank's not top ranked globally, it doesn't mean it's not strong in its home market or a particular niche. BNP Paribas, for example, ranks outside the top 10 in the U.S, and APAC, but is comparatively strong in Europe. SocGen is a leading player in equity derivatives and futures and options trading, but is grounded in Europe and lacks a real presence elsewhere.
Using McKinsey's categorization, it's evident that many of the tier three banks occupy the category of, 'regionally focused banks strong in some product areas.' The same applies to Nomura in Asia and Wells Fargo and RBC in the Americas.
Coalition's data is a snapshot in time. The tiers are - needless to say - evolving as banks change their strategies.
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