Prime services continue to shine
01 March 2018 Australasia
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Equities Prime Services continues to be a bright spot in the Australasian investment banking universe, outperforming traditional equities businesses (cash and derivatives) for the past three years, according to a new short paper by global analytics specialist CRISIL Coalition.
CRISIL Coalition defined prime services as comprising synthetic financing/delta 1, equities prime brokerage, fixed income and foreign exchange prime brokerage, equities futures and fixed income futures.
The firm said that revenues from mergers and acquisitions (M&A), equity capital markets (ECM) and debt capital markets (DCM) have continued declining from their peak in 2014.
M&A revenues declined moderately due to reduced deal volumes, driven by lower levels of outbound deals and reduced activity in energy and utilities.
ECM revenues declined due to an absence of large initial public offering (IPO) transactions, many of which were withdrawn. The real estate and consumer sectors witnessed the largest fall.
Reduced DCM revenues reflected lower syndicated loan volumes due to a significant reduction in refinancing activity. energy, utilities and Industrial were the most affected Sectors.
Japan underperformed in the APAC region driven by lower market revenues, especially in fixed income, commodities and currencies (FICC). By contrast, independent broker-dealers and prime brokers witnessed revenue improvements.
In emerging Asia, the decline in investment bank revenues reflected significantly lower revenues in FICC and, to a lesser degree, ECM and M&A. Equities outperformed there, driven by improved performance in cash equities and equity derivatives.
CRISIL Coalition defined prime services as comprising synthetic financing/delta 1, equities prime brokerage, fixed income and foreign exchange prime brokerage, equities futures and fixed income futures.
The firm said that revenues from mergers and acquisitions (M&A), equity capital markets (ECM) and debt capital markets (DCM) have continued declining from their peak in 2014.
M&A revenues declined moderately due to reduced deal volumes, driven by lower levels of outbound deals and reduced activity in energy and utilities.
ECM revenues declined due to an absence of large initial public offering (IPO) transactions, many of which were withdrawn. The real estate and consumer sectors witnessed the largest fall.
Reduced DCM revenues reflected lower syndicated loan volumes due to a significant reduction in refinancing activity. energy, utilities and Industrial were the most affected Sectors.
Japan underperformed in the APAC region driven by lower market revenues, especially in fixed income, commodities and currencies (FICC). By contrast, independent broker-dealers and prime brokers witnessed revenue improvements.
In emerging Asia, the decline in investment bank revenues reflected significantly lower revenues in FICC and, to a lesser degree, ECM and M&A. Equities outperformed there, driven by improved performance in cash equities and equity derivatives.
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