The investment banking industry across the globe has slowly started to shrink. Blame it on the financial crisis of 2008 or the massive fines that these banks have had to incur, but the sector is gradually starting to lose its charm.
Globally, banks have paid an estimated $170 billion in fines since 2008, according to reports from Macquarie. However, a number of analysts have also attributed the cost cutting they are undertaking to volatility and uncertainty in the global markets.
“It is a combination of factors,” says Marc Ostwald, macro strategist at London-based ADM Investor Services. “There is central bank quantitative easing, negative interest rates and zero interest rates policies which effectively detract quite heavily from portfolio rotation in many sectors.”
The second factor, he says, is more regulation and capital requirement hikes post the global financial crisis. That has led to less trading and much higher costs associated with compliance and risk monitoring. The third is “fintech disruption in all of its forms – migration to family offices, algo and high frequency trading.”
In the last year, banks like RBS, Credit Suisse, Deutsche Bank and BNP have announced their plans to close operations that they saw as less profitable. The latest addition to the list is Japanese investment bank Nomura which announced on Tuesday its plans to restructure its business in Europe and the Americas. Sources told Reuters the bank could cut up to 600 jobs, mainly in its European cash equities business.
The investment bank has said it will focus on its core business in the Americas and will make further detailed announcements later this month. The bank stated that it will close certain businesses in EMEA but will not make any changes to its Asia Pacific platform.
Nomura’s COO Tetsu Ozaki, in a statement, said: “this exercise will deliver significant efficiencies and cost savings for Nomura, refocusing the firm’s activities and reallocating resources towards its areas of expertise and most profitable business lines.”
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