investment banking & capital markets quarterly · 2013-07-25 · investment banking &...

INVESTMENT BANKING & CAPITAL MARKETS

Market Report – Q4 2002 Edition

New York, Frankfurt

February 18th, 2003

THE BOSTON CONSULTING GROUP

-1-Q4 2002 Market Report-BR-AL-NYC-18Feb03.ppt

TABLE OF CONTENTS

Chapter Page

Executive summary

Overview of 4th quarter 2002

Lessons from 2002

Market review

• Fixed income origination

• Equity origination

• Mergers and acquisitions

• Equity trading

Data definitions

2

5

12

25

53


Executive Summary


SEVERAL INVESTMENT BANKS SHOW SURPRISING PROFITABILITY DESPITE A DIFFICULT MARKET

Pure investment banks fared better than integrated corporate and investment banks in 2002 with the exception of Citigroup

• Profit margins of pure investment banks(1) on average at 26.5% in 2002• High loan loss provisions at integrated players(2) lead to lower profit margins of 19.0%

Success of midsize players reflects strong focus on products or market segments• Bank of Montreal, Barclays Capital, and Wachovia achieved pre-tax profit margins of

over 30% despite the difficult market situation

4th quarter investment banking results continued to be driven by cost cutting activities• Revenues remained at 3rd quarter levels, slightly down by 1% on average• Profit margins improved by 5 percentage points from previous quarter

However, future earnings growth may require an increase of revenues from investment banking business and industry is in dire need of improving market conditions

• Average quarterly revenue of top banks has declined by 39% since 1st quarter 2001

(1) Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers(2) Citigroup, CSFB, Deutsche Bank, JPMChase, UBS


SOME BANKS ACHIEVED PROFIT MARGINS OF OVER 30% DESPITE DISMAL MARKET IN 2002

2002Gross profitmargin (%)

2002 Revenues ($B)

0

10

20

30

40

0 5 10 15

Citi

JPMC

DBCSFB

GS

MSML

LB

ABN Amro

BNPP

US Bancorp

SocGen(1)

BofA

WachoviaBMO(1)

RBC

Pure Investment Banks

Midsize Investment Banks

SEBanken

CAI(1)CL(1)

BarclaysBearStearns

Integrated Investment Banks

UBS

(1) Includes investment banking as well as corporate banking businessNote: 2002 investment banking results unless stated otherwise; players which didn’t report full financial year 2002 results yet

were estimated based on first 9monthsSource: Company financial results, BCG analysis


Overview of 4th Quarter 2002


INVESTMENT BANKS’ 4TH QUARTER RESULTS DRIVEN BY COST CUTTING ACTIVITIES

BCG’s investment banking performance index improved 5% from 3rd quarter 2002

Though revenues declined slightly from 3rd quarter, additional cost cutting improved bottom line results for global investment banks

• Revenues remained steady at 3rd quarter levels, slightly down by 1% on average• Profit margins improved by 5% from previous quarter

Most investment banks in our group were able to improve margins, whereas rising credit costs hurt profitability at Citigroup and JPMC

Advisory and underwriting revenues improved while trading revenues lagged behind 3rd quarter 2002

• Advisory and underwriting revenues increased 12%• Trading-related revenues of top players declined 4% from previous quarter

(1) Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers


BCG PERFORMANCE INDEX STAGNATING ON LOW LEVEL

BCG IB Performance IndexIndexed

44.642.648.651.4

56.956.1

80.171.469.8

108.2100

72.6

0

20

40

60

80

100

120

Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 1Q/02 2Q/02 3Q/02 4Q/02

2000 2001 2002

Note: BCG IB performance index is calculated based on profitweighted volume trends in M&A, ECM, Equity Sales & Trading and Bond Origination

Source: Dealogic; SDC; Autex; BCG-analysis


BOND UNDERWRITING AND M&A IMPROVED BUT EQUITY BUSINESS REMAINED SLUGGISH

020406080

100120140160

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

$BCorporate Bonds Origination

0100200300400500600700800

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

M&A Advisory(1)

$B

0

2

4

6

8

10

12

1Q00 3Q00 1Q01 3Q01 1Q02 3Q020

1020304050607080

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

Equity Origination Equity Trading

US

Asia

Europe

$B $tr

(1) Based on effective transactionsSource: Dealogic; SDC; FIBV, BCG-analysis


COST FOCUS LEAD TO INCREASED PROFITABILITY IN 4TH QUARTER Q4/02 vs. Q3/02

10%

15%

20%

25%

30%

35%

40%

45%

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Revenues($B)Ø –0.8%

Ø+4

.7%

LB

ML

GS

MS(2)

JPMC(3)Citi(1)

DB

Gross profitmargin (%)

Q3/02

Q4/02

(1) Q4/02 results exclude a $2b reserve set aside for settlement with regulators and the civil litigation(2) At Morgan Stanley, compensation payments accrued in earlier periods resulted in very high profit margins in Q4/02(3) JPMC’s 3Q02 results exclude $1.3b in loan loss provisionsNote: Ø calculated on a revenue weighted basis; Operating revenue for investment banking and institutional sales and trading;

extraordinary charge-offs excluded; CSFB, UBS results for Q4/02 not yet reported Source: Company reports, BCG analysis


PROFIT MARGINS ALSO HIGHER THAN A YEAR AGOQ4/02 vs. Q4/01

15%

20%

25%

30%

35%

40%

45%

0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5


LB

ML

GS

MS(2)

JPMC

Citi(1)

Ø+0

.7%

DB


Q4/01

Q4/02

(1) Q4/02 results exclude a $2b reserve set aside for settlement with regulators and the civil litigation(2) At Morgan Stanley, compensation payments accrued in earlier periods drove high profit margins in 4th Quarter 2001 and 2002Note: Ø calculated on a revenue weighted; Operating revenue for investment banking and institutional sales and trading;

extraordinary charge-offs excluded; CSFB, UBS results for Q4/02 not yet reported Source: Company reports, BCG analysis


ADVISORY AND UNDERWRITING REVENUES IMPROVED BUT TRADING REVENUES LAGGED 3RD QUARTER

10%

15%

20%

25%

30%

35%

40%

0.2 0.4 0.6 0.8 1.0 1.2

Advisory/Underwriting Revenues

Q4/02 vs. Q3/02

GS

LB

CitiMS

ML

JPMC

Revenues($B)Ø +11.7%

DB

Trading Related RevenuesQ4/02 vs. Q3/02

60%

65%

70%

75%

80%

0.5 1.0 1.5 2.0 2.5 3.0 3.5

MS

LBCiti

GS

JPMCTradingrev as% of totalrevenueQ4/02


ML

DB

IBD rev as% of totalrevenueQ4/02

Q3/02

Q4/02

Note: CSFB, UBS results for Q4/02 not yet reported;Source: Company reports; BCG-analysis


Lessons from 2002


KEY MARKET OBSERVATIONS IN 2002

Pure investment banks fared better than integrated corporate and investment banks – with the exception of Citigroup

• 2002 profit margins of top investment banks on average at 26.5% whereas average margins of integrated players declined to 19.0%

Integrated corporate and investment banks who supported investment banking business with corporate loans were hurt by high loan loss provisions in 2002

• Loan loss provisions of integrated players doubled to more than $8b in 2002

Midsize players need a clear focus to be successful• Players who focused on a specific market segment or industry segment reached

higher profit margins than their unfocused competitors


‘PURE’ INVESTMENT BANKS FARED BETTER THAN INTEGRATED PLAYERS

FY2002 vs. FY2001

2001

20025%

10%

15%

20%

25%

30%

35%

40%

2.5 5.0 7.5 10.0 12.5 15.0


Ø–4

.2% LB

ML

GS

MS

JPMC

Citi

CSFB

DB

(1) GS, LB, ML, MS(2) Citi, CSFB, DB, JPMC, UBSNote: Ø calculated on a revenue weighted; Operating revenue for investment banking and institutional sales and trading;

extraordinary charge-offs excludedSource: Company reports, BCG analysis

UBS

Avg. marginspure I-banks:

26.5%(1)

Avg. marginsintegratedI-banks(2):

19.0%



THREE MAIN REASONS WHY PURE INVESTMENT BANKING PLAYERS FARED BETTER

Pure investment banks used flexible compensation expenses to adapt cost base quickly• Investment banks have high performance oriented share in overall compensation• E.g. Merrill Lynch’s compensation ratio declined from 50.5% in 1st quarter 2001 to

47.2% in 4th quarter 2002

Biggest global investment banks have superior deal economics

• Execution quality and top talent still the main selection criteria for investment banking mandates

Leading investment banks handed out credit more selectively and thus suffered less from loan loss provisions

• Pure investment banks avoided less profitable lending business during boom time


SUPERIOR DEAL ECONOMICS OF PURE INVESTMENT BANKS IN ADVISORY AND UNDERWRITING

M&A Global ECM Global DCM GlobalAveragedeal size($M)

0

500

1000

1500

2000

0 100 200 300Number of deals

ABN

ML

MS

LB

DB

RothschildBNPP

Cazenove

Citi

ING

GS

JPMC

CIBC

UBS

SocGen

Coba

Lazard

CSFB

DKWHSBC

BS

BoA

Nomura0

50

100

150

200

250

300

350

400

0 50 100 150 200 250Number of deals

CSFBABN

CitiDB

DKW

GS

MS

UBS

MLJPMC

BS

LB

BoA

SocGen

Nomura

HSBC

CazenoveBNPP

ING

DaiwaCIBCWachovia

Coba

Averagedeal size($M)

Averagedeal size($M)

0

50

100

150

200

0 400 800 1200 1600Number of deals

JPMC

LB

ABN

HSBC

Citi

CSFB

DB

GS

MS

Mizuho

CIBCING

UBS

BNPPDKW

BoABS

Nomura

WachoviaDaiwaBaclays

WachoviaUSBC


LOAN LOSS PROVISIONS AT INTEGRATED CORPORATE AND INVESTMENT BANKS DOUBLED IN 2002

Credit loss provisions

-100%

-50%

0%

50%

100%

150%

4Q02 vs3Q02

4Q02 vs4Q01

2002 vs 2001

Growth

-38% -4%

DB

JPMC

Total

Citi

99%

CSFB

UBS

270 286 212671 611 455

710 829164

328 210 438

681 372

167268

618

282 306

1315

489

172 198

469

199 252

549

333

-19

3195

57

-200

200

600

1,000

1,400

1,800

2,200

2,600

3,000

3,400

3,800

1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02

$M

474805

666

2119

13261467

3270

2041

(1)

Support of investment banking business by lending without tight risk control backfired in recession

Support of investment banking business by lending without tight risk control backfired in recession

(1) Q4/02 loan loss provisions for UBS, CSFB estimated based on avg. first 9 months averageSource: Company reports


FOCUSED MIDSIZE PLAYERS OPERATED SUCCESSFULLY IN 2002FY2002 vs. FY2001

Revenues($B)

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0.0 1.0 2.0 3.0 4.0 5.0 6.0

BNPP

BMO(1)

CAI(1)

ABNAmro

BarclaysCapital

BofA

CIBCWorldmarkets

CL(1)

RBCCapital

S-E Banken

SocGen(1)

Wachovia

U.S.Bancorp


2001

2002

Note: 2002 results; players which haven’t reported full financial year 2002 results yet, were estimated based on first 9 months.Investment banking results only unless other stated

(1) Includes investment banking as well as corporate banking businessSource: Company financial results, BCG analysis


SUCCESS OF STRONG MIDSIZE PLAYERS REFLECTS FOCUS

Wachovia leveraged large corporate product capabilities to serve their middle market customer franchise

• Limited exposure to large corporates• Aligned investment banking cost base to economics of middle market segment• Achieved profit margin of almost 40% in 2002

Bank of Montreal focused successfully on middle market customers and selected industry sectors

• Concentrated on middle market franchise in the Midwest• Continued to build historic market niche in media, communications, and energy• Improved investment banking margins by 8 percentage points in 2002

Barclays Capital continued to profit from its concentration on the debt business• Thereby benefiting from the current market conditions• One of the only banks which increased investment banking revenues in 2002

Focus on core business segments and align all resources behind them• Successful midsize players cooperate with global banks in the front office

while they outsource back office operations and IT

Focus on core business segments and align all resources behind them• Successful midsize players cooperate with global banks in the front office

while they outsource back office operations and IT


2003 INVESTMENT BANKING AGENDA

From product focused to customer centric investment banking• Increased emphasis on client facing activities in investment banking as well as sales

and trading divisions

Improve cooperation between corporate and investment banking• Maximize overall client profitability• Reduce exposures in unprofitable segments and lower grade credits

Manage economics of equity research• Adjust analyst compensation to market environment• Reflect regulatory context in terms of cost allocation changes• Streamline sector coverage by merging some sectors and withdrawing from non-core

sectors – align with sector focus in investment banking division


FROM PRODUCT FOCUSED TO CUSTOMER CENTRIC INVESTMENT BANKING

Increased client demand for structured products requires a combined equity and debt offering approach (e.g. structured equity derivatives, convertible bonds, etc.)

• Merge equity and debt capital markets divisions• Centralize information flow to maximize client penetration• Opportunity to improve client coverage at given headcount and to eliminate

redundancies

Reduced number of industry sector groups creates critical mass and scale • Merge or focus industry sectors: Wider scope definition of industry sector increases

flexibility within group• Resize capacity• Raise the number of people directly serving the client and allow more creative deal

structuring


MAXIMIZE CLIENT FACING ACTIVITIES IN INVESTMENT BANKING DIVISION

Productspecialists

ClientCRM

Productspecialists

SectorGroups

ClientCRM

SectorGroups

EquityCapitalMarkets

GlobalCapitalMarkets

DebtCapital markets

Increase client coverage with fewer or same headcount Increase client coverage with fewer or same headcount


COOPERATION OF INVESTMENT BANKING AND ‘CREDIT’ IS BASED ON FOUR PILLARS

Increase credit risk transparency of credit risk via an integrated credit risk management system

Knowledge of credit risk allows adequate pricing or decline of investment banking business

Risk-based pricing of investment banking deals improves client profitability across products and across the complete business cycle

Implement client specific planning and target setting

Maximize client profitability and penetration of focus clientsMaximize client profitability and penetration of focus clients

Transparency

Risk-base pricing

Client profitability

Strategic prioritization


STRATEGIC LEVERS TO IMPROVE ECONOMICS IN EQUITY RESEARCH

Revisit analyst compensation• Analysts acted and were paid like movie stars in the heydays of the dot-com

bubble

Reflect regulatory context in terms of cost allocation changes• Regulatory and business changes diminish the value of equity research to the

investment banking division

Align sector focus and quality of research with equity trading strategy• Meet demand of core buy-side clients

Increase cooperation between research analysts and equity sales people• Equity research not a stand-alone product but an integrated component of the

equity sales and trading strategy


Market Review:

Fixed Income Origination



BOND ORIGINATION IMPROVED SLIGHTLY IN 4TH QUARTER 2002Fixed Income Origination

Bond originations recovered slightly from 3rd quarter 2002 helped by declining interest rate spreads and another round of interest rate cuts by Central Banks in Europe and the U.S.

• Overall bond originations volumes improved 8% from previous quarter

• Corporate bond issuance picked up 29% in 4th quarter

Bond issuance supported investment banking results throughout 2002

• Fixed income volumes down by only 5% from record year 2001

European investment banks regained market share back U.S. investment banks in Europe

• Barclays, ABN Amro and Société Generale particularly strong in 2002

Market leader positions fairly stable in 2002

• Citigroup, JPMC, Deutsche Bank and Nomura remained strongest players in bond underwriting


Fixed Income OriginationFixed Income Origination

BOND ORIGINATION VOLUMES IMPROVED SLIGHTLY

Market volumes

-13%-6%

12%

-3%

15%5%

-4%-12%

9%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

Global

US

Asia

Europe

8%

-5%-11%

272 226148

223 233 221 170 195

524551

449

523568

493

437460

43 95

39

5543

66

5661

0

100

200

300

400

500

600

700

800

900

1000

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$B839

872

636

801844

780

663715

Source: Dealogic; SDC; BCG-analysis



BOND TRANSACTION SIZES IN EUROPE AND ASIA STILL RELATIVELY SMALL

Number of transactions

1178 1168 894 1115 1224 1220 1153 1354

27473175

23412452 2466 2607 2465 2236

531

1059

475426 486 500 554 610

0

1000

2000

3000

4000

5000

6000

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

41764456

5402

37103993

41724327 4200

Average transaction size

0

50

100

150

200

250

300

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$M

Global

US

Asia

Europe

202188

161 171201

180159

170

Note: Number of transactions in the US and Asia includes double countingof domestic and international tranches



Corporate BondsCorporate Bonds

CORPORATE BOND MARKET GREW BY 30% FROM 3TH QUARTER

Market volumes

-31%-42%

35%

27%

-41%-52%

-12%

-13%

24%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

29%

-44%

Global

US

Asia

Europe

-35%

79 7841

66 53 6328 38

132 146

87

116

93 90

4355

2529

19

25

1828

18

22

0

50

100

150

200

250

300

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$B

236253

147

207

164181

89

115




BUT AVERAGE TRANSACTION SIZE REMAINED SMALL

Number of transactions

221 238148 204 186 207 138 165

364472

240

342255

312

206230

268

292

294

219

225202

147224

0

200

400

600

800

1000

1200

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

853

1002

682

765

666

491

721

619

Average transaction size

0

50

100

150

200

250

300

350

400

450

500

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$M

Global

US

Asia

Europe

246277252

215270

250

182186

Note: Number of transactions in the US and Asia include double countingof domestic and international tranches




EUROPEAN INVESTMENT BANKS REGAINED SHARE FROM BULGE BRACKET IN EUROPE


All bonds US

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%Relative market-position 2001

Barclays

Gained share

Lost shareHSBC

GS

DB

CSFB

ML

MS

Citi

JPMC

LB

UBS

BS

Wachovia

ABN

BoA

All bonds Europe

0%

20%

40%

60%

80%

100%


BNP

ABN

HSBCSG

Nomura

Barclays

Gained share

Lost share

GS

DB

CSFBML

MS

Citi

DKW

JPMC

LB

UBS

Coba

BoAMizuhoDaiwa

Relativemarket-position2002





JAPANESE BANKS CONTINUED TO DOMINATE ASIAN BOND UNDERWRITING

All bonds Asia

0%

20%

40%

60%

80%

100%


HSBC

Gained share

Lost share

MitsubishiTokyo

Mizuho

Daiwa

Nomura

GSCSFB

ML

Citi

JPMCUBS

MS

ABN

DB

SG BNP

Barclays





JPMC STRONGEST CORPORATE BOND UNDERWRITER IN THE U.S.

Corporate bonds Europe

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

HSBC

SG

Barclays

BNP

Gained share

Lost share

ABNGS

DB

CSFB

ML

MS

Citi

DKW

JPMC

LBUBS

BoA

Coba

Relative market-position 2001

INGMizuho

Corporate bonds US

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Gained share

Lost shareBarclays

GS

DBCSFB

MLMS

CitiJPMC

LB

BS

UBS

Wachovia

BoA







JAPANESE BANKS LOST SHARE IN ASIAN CORPORATE BONDS

Corporate bonds Asia

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Nomura

MitsubishiTokyo

Gained share

Lost share

Daiwa

BarclaysGS DB

CSFBML

MS

Citi

JPMC

Mizuho

UBS


ABN

HSBC




Market Review:

Equity Origination


ECMECM

2002 A TERRIBLE YEAR FOR EQUITY CAPITAL MARKETS

Equity origination in 4th quarter again hit by economic downturn and uncertain stock markets• Equity issuance in 4th quarter down by 17% from previous quarter• Asian equity origination declined by almost 50% from 3rd quarter

Global equity underwriting volumes declined by 18% in 2002 compared with last year

Citigroup won biggest U.S. equity mandates and took the top market position from the bulge bracket

Goldman Sachs became top European equity underwriter in 2002• Winning the lead from Merrill Lynch


ECM

ECM VOLUMES DECLINED DESPITE SLIGHT INCREASE IN U.S. ECM

Market volumes

-39%-48%

-19%

1%

-11%-21%

9%

-23%

-54%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

-17% -18%

Global

US

Asia

Europe

44%

2840

1624 24 30

17 15

26

36

15

3224

31

13 15

15

9

13

10

11

13

158

0

20

40

60

80

100

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$B

69

85

44

6659

74

4537



ECMECM

AVERAGE ASIAN TRANSACTION SIZE REMAINED VERY SMALL

Number of transactions Average transaction size

0

50

100

150

200

250

300

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02Global

US

Asia

Europe

137

13897

108

106

105

112

87

$M

156 19073 122 105

15964 78

142179

116

209162

206

4799

200

244

262

280

290

343

290249

0

100

200

300

400

500

600

700

800

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

557498

613

451

611

708

401 426

Note: Number of transactions in the US and Asia includes double countingof domestic and international tranches



ECM

CITIGROUP WON LEAD FROM GOLDMAN IN U.S. -GOLDMAN TOOK LEAD FROM MERRILL IN EUROPE

ECM

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Gained share

Lost share

ECM US

GS

DB

CSFB

ML

MS

Citi

JPMC

LB

UBSBS

BoA


0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Gained share

Lost share

ECM Europe

ABN

SG

GS

DB

CSFBML

MS

Citi

DKW

JPMC

UBS

CazenoveHSBC

LBBNP


ING





ECMECM

UBS SUCCESSFUL IN ASIA

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Gained share

Lost share

ECM Asia

Nomura

DaiwaGSML

Citi

JPMC

UBS

DBCSFB

MS


ABN

BNP


Note: Some local players were not trackedSource: Dealogic; SDC; BCG-analysis


Market Review

Mergers and Acquisitions


M&AM&A

M&A ADVISORY BUSINESS HAD A DIFFICULT YEAR

Global advisory volume in 2002 plunged by 41% from last year• Announced merger volumes returned back to 1994 levels

Upward trend in announced mergers and acquisitions continued in 4th quarter• Mainly driven by European and Asian mergers• 4th quarter volumes still 24% below last year’s 4th quarter level

Deutsche Bank gained market share in Europe and the U.S. • Top advisor in European m&a 2002

Goldman continues to be strongest advisory house globally

Dresdner Bank lost market share after departure of Bruce Wasserstein to Lazard


M&A

M&A VOLUMES CONTINUED TO RECOVER –2002 VOLUMES STILL DOWN BY 40% FROM 2001

M&A

Market volumes: Effective deals

28%42%

-16%

33%

12%

-54%

-28%-35%

25%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

Global

US

Asia

Europe

20%

-3% -41%

163 137 131 106 90 112 110 141

451

208 257220

116 113 141158

52

120 45

42

2635

4860

0

100

200

300

400

500

600

700

800

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$B666

465433

368

232260

299358

Note: Market volumes reflect true transaction volumes single-countedSource: Thomson SDC; BCG-analysis


M&AM&A

AND ANNOUNCED DEALS DON’T INDICATE A STRONG REBOUND

Market volumes: Announced deals

60%

-31%

26%

-20%

41%

-52%-58%

-17%

5%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

Global

US

Asia

Europe

8%

-24% -37%

217 185110 109 108 138

96154

261

210305

245

106133

149103

61

64 42

46

33

5838 48

0

100

200

300

400

500

600

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$B

539

459 457

400

247

329283 306

Note: Market volumes reflect true transaction volumes single-countedSource: Thomson SDC; BCG-analysis


M&A

MORE DEALS COMPLETED IN 4TH QUARTER 2002 ESPECIALLY IN ASIA

M&A

Number of effective transactions(1)

531 504366 401

281 313 368 398

461337

352373

301 308326 311

253

228

175221

169212

221 264

0

200

400

600

800

1000

1200

1400

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

751

1245

1069

893995

833915

973

Average transaction size(1)

0

200

400

600

800

1000

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02

$M

Global

US

Asia

Europe

278

499

398

449

338

277302

339

Note: (1) Only deals with advisorSource: Dealogic; SDC; BCG-analysis


M&AM&A

DEUTSCHE BANK GAINED MARKET SHARE IN ADVISORY

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

M&A Europe

Lost share

Lazard

Rothschild

BNP

ABN

GSDB

CSFB

ML

MS

Citi

DKW

JPMC

LB

UBS

Gained share

SG

HSBC

INGCoba


Cazenove

M&A US

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

GSGained share

Lost share

DB

CSFB

ML

MS

Citi

DKW

JPMC

LBUBSBS

Rothschild

BoA


LazardCIBC



Note: Based on effective transactionsSource: Thomson SDC; BCG-analysis


M&AM&A

CITIGROUP INCREASED ASIAN MARKET SHARE

M&A Asia

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Lost share

GS

DB CSFB ML

MSCiti

JPMC

UBS

Nomura

Gained share

Rothschild

Daiwa

Mizuho

ING

ABNLB


Lazard

MitsubishiTokyo

Greenhill


Note: Based on effective transactions; some local players were not trackedSource: Thomson SDC; BCG-analysis


Market Review:

Equity Trading


GLOBAL EQUITY TRADING VOLUME DOWN AGAIN

Fear of war with Iraq and economic slow-down depressed global stock market activity in 2002• Global equity trading volumes declined by 18% in 2002

Uncertain stock market environment continues in 2003• Global stock markets lost another 5% of their value in January 2003

Institutional equity trading is further commoditizing• Commissions decline• Electronic connectivity makes brokers interchangeable

Trading houses focus on high-margin businesses• Prime-brokerage services to alternative investors

Deutsche Bank lost share to competition in 2002 but remained dominant European institutional equity trading house


Equity tradingEquity trading

EQUITY TRADING VOLUME DECREASED FURTHER

-6% -9%

6%

-22%-20%

-3%-19%-18%-6%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

4Q/02 vs. 3Q/02 4Q/02 vs. 4Q/01 12M02 vs 12M01

Growth

Global

US

Asia

Europe

3.6 3.2 2.8 2.9 2.4 2.7 2.4 2.3

7.36.0

4.6 5.25.1 4.9

4.4 4.3

0.9

0.9

0.70.9

1.0 1.00.8 0.8

0

2

4

6

8

10

12

14

Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 4Q/02

$tr 11,8

10,1

8,28,9

8,4

-5% -18%8,6

-18%

7,6

(1)

7,4

Market volumes

(1) Europe revised due to change in Euronext and Spanish Exchanges (BME) calculating method

Note: Single counted, includes investment funds traded at exchangesSource: FIBV; BCG-analysis


Equity tradingEquity trading

DEUTSCHE REMAINED TOP PLAYER IN EUROPE BUT LOST SHARE TO COMPETITION

Institutional equity trading US

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Fleet Boston

KnightGained share

Lost share

GS

DB

CSFB

ML

MSCiti

JPMC

LBUBS

BS BoA

ABN


CBICSG

Institutional equity trading Europe

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

ABN

HSBCBoA

Gained share

Lost share

GS

DB

CSFBMLMS

CitiDKW

JPMC

LB

UBS

Coba


Cazenove

SG



Note: ML includes HHG; GS includes SLK; DB includes NDB; ABN includes ING US;relative market positions are based on number of traded shares relative to market leader

Source: Autex; BCG-analysis


Equity trading

CITIGROUP TOOK OVER LEAD IN ASIAN EQUITY TRADING –UBS ALSO STRONG

Equity trading

Institutional equity trading Asia

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

HSBC

ABN

Gained share

Lost share

ING

GS

DB

ML

MS

Citi

DKW

JPMC

LB

UBS

CSFB



Note: Does not include Japanese players not reporting to Autex;relative market positions are based on number of traded shares relative to market leader

Source: Autex; BCG-analysis


Data Definitions


DATA DEFINITION OVERVIEW

Regional deal allocation is based on issuer’s country (parent issuer’s country where available). M&A deals are allocated by target nation.

European data are sourced from Dealogic; U.S. and Asian data from Thomson Financial Securities Data

Relative market shares are based on bookrunner league tables

Equity origination data include common stock IPOs and secondary issues

Bond origination data contain all convertible and non-convertible bonds including ABS, MBS, municipals, agency, and corporate bonds

Corporate bonds are limited to industrials and utilities excluding financial services issuers

Equity trading market data reflects institutional block trades as advertised in Autex Blockdata

Goldman Sachs’, Lehman Brothers’, and Morgan Stanley’s 4th quarter ended in November, all others in December 2002

investment banking & capital markets quarterly · 2013-07-25 · investment banking &...

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