European Investment Banks Seeing Mixed Equity Underwriting Performance Outside EMEA

With companies across Europe getting more than half a year to put the shock of an unexpected Brexit vote behind them, share issuance activity in the region saw a sharp recovery over the first quarter of the year. This in turn helped the four largest European investment banks, as their equity underwriting deal volumes increased from an average of $25 billion over Q3-Q4 2016 to almost $31 billion in Q1 2017.

The chart below captures the total size of equity capital market deals completed by the four largest European investment banks since Q1 2017. The green-to-red shading for figures along a row show the variations in deal size for a particular bank over this period.

Equity underwriting volumes for individual banks were taken from Thomson Reuters’ investment banking league tables for the last five quarters. It should be noted that the largest equity capital market deals employ more than one investment bank, so the market share figures are not exclusive. Notably, Q1 2016 was an exceptionally poor period for the industry as a whole, with things improving considerably in Q2.

The table below captures the respective market shares for each of these banks over this period. The green-to-yellow shading for figures in a column should help compare the relative standings of these 4 banking giants in a particular quarter.

As a majority of the business for these European investment banks comes from the EMEA (Europe, Middle East and Africa) region, they were hit by the unexpected reduction in activity level immediately after the unexpected Brexit vote, as companies in the region delayed their plans of raising capital through share issuances over the second half of 2016. Additionally, Asia (especially China) has been a major source of growth in equity underwriting activity over recent years, and these banks have been unable to do as well as their U.S.-based counterparts in the region.

Notably, Credit Suisse had a particularly bad quarter as it fell to the #4 position among these banks for the first time since Q2 2014. The Swiss banking giant usually ranks #1 or #2 for a quarter, but a sub-par share of the U.S. equity underwriting market in Q1 was the reason for the relatively poor showing. You can see how changes in Credit Suisse’s share of the equity underwriting industry impact our price estimate for the bank’s shares by modifying the chart below.

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