A decline in appetite for fixed income, currencies and commodities products dragged down Asia-Pacific investment bank revenues in 2017 for global banks to its lowest level in five years, according to research company Coalition.
This was in line with global revenue data that tracked such revenues of major U.S. and European institutions.
Total Asia-Pacific investment bank revenues reached US$54.2 billion, down 6% year over year, Coalition noted in its annual "IB Index" report. The report grouped the region into Australasia, comprising mainly Australia and New Zealand; Emerging Asia, comprising countries such as Hong Kong and Singapore but not Japan; and Japan.
"One major reason for the FICC decline [in Emerging Asia] was because offshore institutional investors lost their appetite for Asian products," said George Kuznetsov, Coalition's London-based head of research and analytics. "While local investors maintained stable activities, the global banks were impacted by low volatility [in the market] and hence low trading revenues."
Offshore investors, he added, shifted their attention to developed markets such as the U.S., in anticipation of interest rates changes, and the U.K., due to volatility in sterling-denominated products.
Australasia was the best performing region across Asia-Pacific in 2017, even though its revenues fell year over year amid a decline in the merger and acquisitions, equity capital markets and debt capital markets businesses.
Revenue pools from these investment banking operations fell to their lowest levels in four years. Conversely, trading in FICC and equities products was stable for Australasia in 2017.
"We are slightly more optimistic for 2018,” said Kuznetsov, attributing this to recent market volatility that could boost trading activities. Any improvement though, he added, will be offset by increased competition and margin pressure.
Global banks are also expected to be expanding in Asia Pacific in 2018, particularly Australia.
"We’re in the beginning of a wave of global banks expanding into Australia again, which will lead to some hiring and expansion of headcount in that market," said Kuznetsov.
Coalition is owned by CRISIL. S&P Global Market Intelligence and CRISIL are owned by S&P Global Inc.
Click here for a previous story utilizing Coalition's report forecasting corporate and investment banking revenue in Asia-Pacific.