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LONDON, Nov 17 (IFR) - A rebound in fixed income revenuesthis year may not be enough to offset a drop in equities andadvisory and underwriting fees, which is likely to leaveinvestment bank revenues down for a fourth successive year,consulting firm Coalition said.
Coalition said on Thursday revenues from fixed income,currency and commodities (FICC) in 2016 should reach US$73.4bnat the 12 largest investment banks, which would be up 5% from2015 and end three years of declines.
But equities revenues are on course to fall 15% from a yearago to US$42.3bn and investment banking division (IBD) revenuesare set to fall 10% to US$36.5bn, Coalition estimates.
That would leave investment bank revenues at the 12 firms ofUS$152.2bn, down 5% from 2015 and down 13% from revenues ofUS$175bn across those product areas in 2012.
Banks continued to reduce their front office headcount inthe first nine months of the year, although Coalition said thepace of the cuts slowed in the second and third quarters. Itestimated the dozen banks had 53,300 front-office staff acrossFICC, equities and IBD at the end of September, down 4% from ayear earlier and 16% lower than four years earlier.
The rebound in FICC revenues stops a rot seen since 2012,which has eased concern the industry was on a long, steadydecline.
After a weak first quarter, FICC revenues have surged and inthe third quarter they were up 36% from a year earlier,Coalition estimates.
"It's been a roller-coaster. We started at an all-time low,the first quarter was a disaster, but in fixed income we've seenan amazing second quarter and third quarter," said GeorgeKuznetsov, head of research and analytics at Coalition.
The recovery has been underpinned by a rise in credit-linkedproducts and G10 rates due to narrower credit spreads, increasedclient activity and improved liquidity, Coalition said.
In equities, weakness in cash and derivative products hascontinued, while investment banking divisions have been hit byreduced IPO and follow-on activity, especially in Europe.
After the first three quarters of 2016, FICC revenues wereup 2% from a year ago, equities revenues were down 16% and IBDwas down 12%, Coalition estimates. In aggregate, revenues weredown 7%. (Reporting by Steve Slater)
