Global Investment Banking Revenue to Drop 4%, JPMorgan Says
February 23, 2012, 7:51 AM ESTBy Elisa Martinuzzi and Liam Vaughan
(Updates with divisional revenue in fifth paragraph.}
Feb. 22 (Bloomberg) -- Investment-banking revenue will drop about 4 percent this year as commissions earned from advising on mergers, underwriting securities and trading fall, JPMorgan Cazenove analysts said.
Revenue will be 13 percent lower in the first quarter compared with the year-earlier period, analysts led by Kian Abouhossein wrote in a note to clients today.
The analysts upgraded their estimate for fixed-income, currencies and commodities sales to a 13 percent drop for the first quarter from a decline of 26 percent after a “material improvement” at the start of the year. Their estimate for total sales this year was unchanged at 6 percent lower than 2011.
“We witnessed material improvement in investment banking overall revenues from the first two weeks of January into February, leading us to upgrade our year-on-year FICC revenue estimate,” analysts said in the note.
Income from equities will be down 15 percent in the first quarter and 5 percent for the full year over the year-earlier period, the analysts said. Revenues from investment banking, which includes advising companies on mergers and underwriting debt and equity sales, will decline 16 percent in the first quarter compared with the year-earlier period amid a dearth of rights offerings and initial public offerings.
Goldman Sachs Group Inc.’s revenue will outperform Morgan Stanley, the analysts said. UBS AG, Switzerland’s biggest bank, remains their top stock pick in the industry because a drop in revenue may prompt the Zurich-based firm to scale back in investment banking, releasing the proceeds to shareholders.
“In short, UBS investment bank should be much smaller than management’s targets and the release of equity will be highly accretive to shareholders,” the analysts said.
--Editors: Edward Evans, Keith Campbell.
To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net; Liam Vaughan in London at lvaughan6@bloomberg.net.
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
