How Have Equity Underwriting Deals Closed By European Investment Banks Trended In The Last 5 Quarters?

January 6th, 2017 by Trefis Team
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The four largest European investment banks saw their equity underwriting deal volumes shrink for a second consecutive quarter in Q4 as overall weakness in equity issuance worldwide, coupled with the continuing impact of the Brexit vote on equity market activity in Europe, hurt their business. However, the 6% sequential decline in deal volumes for these banks was marginally better than the 8% reduction in global deal size for the period, and as a result their market share nudged up slightly from 13.6% in Q3 to 13.8% in Q4.

The chart below captures the total size of equity capital market deals completed by the four largest European investment banks since Q4 2015. The green-to-red shading for figures along a row show the variations in deal size for a particular bank over this period.

IB_QA_EU_ECMSizeChange_16Q4

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Equity underwriting volumes for individual banks were taken from Thomson Reuters’ investment banking league tables for the last five quarters. 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.

IB_QA_EU_ECMShareChange_16Q4

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.

The market share for these 4 banks jumped to 18% in Q2 2016 as the banks made the most of strong global equity underwriting volumes that quarter. The unexpected Brexit vote and a marked reduction in equity underwriting activity in the U.S. depressed the market size over the second half of the year. As the European banks are primarily focused in the EMEA and have a sizable presence in the U.S., this translated into a notable loss in market share for them.

You can see how changes in UBS’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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