As US and European banks start to present results for the first quarter of 2022, do not expect many to lead with their investment banking divisions. The news there is mostly bad.
Data from Dealogic shows that global investment banking fees came in 33% lower than in the first three months of 2021, a boom time for special-purpose acquisition company (Spac) IPOs and for M&A.
While M&A fees have held up, this is the smallest revenue line in investment banking. The biggest falls have come in high-yield debt capital markets (DCM), where revenues are down 64%, and even worse in equity capital markets (ECM), where fees are down 70% from the first quarter of 2021.
We expect this weakness to continue at least in the short term
Sure. That is a tough comparison. The first three months of 2021 were extraordinary, with $475 billion of global ECM deals, including close to 300 IPOs of Spacs. Spacs have since dried up. There were just over $100 billion of ECM deals in the first quarter this year.
