AMERICAN FIRMS WIDEN LEAD OVER EUROPEAN RIVALS

The FT recently reported that US investment banking firms have widened their lead over European rivals. And European firm revenues were dwarfed by the American take. For example, pre-tax profits at European IB firms booked $4.2billion last year, versus $33.5billion generated by their Americans competitors. The FT reports that US firms benefit from a healthier rebounding economy (with clients actively raising capital and pursuing M&A transactions, generating good fee growth). But more telling, US firms are benefiting from promptly adjusting their business models in the post crisis operating environment.  We see evidence of this in the announcement this week by CS that further structuring of its credit and securitised products business is forthcoming just after its initial restructuring plans were laid out only in the Autumn. 

The Economist recently also observed the same trend with European IB plans for restructuring often being shelved prior to implementation. The Economist illustrates with a graph showing American advances made in terms of market share clusters. This reminds me of a recent PWC Conference held in  in London where commentators were also a bit skeptical on recent monetary policy responses in the Eurozone and argued that a better policy response to current market conditions would be to unclog bank balance sheets from NPLs. Essentially, their argument is that capital transmission to the economy can be being improved by fixing, once and for all, the robustness of European bank balance sheets.  The Economist article can be found here: http://www.economist.com/news/finance-and-economics/21674778-europes-dithering-banks-are-losing-ground-their-decisive-american-rivals-banking.