Investment banks may lose $17 billion of revenue in fixed income, currencies and commodities by 2016 because of levies and regulation, according to a Deutsche Bank AG report.
European securities firms will bear most of the erosion as a tax on financial transactions cuts sales and trading volumes, Deutsche Bank analysts including Matt Spick, wrote in a note to clients today. The next “wave” of regulation on over-the-counter derivatives and clearing may spur smaller competitors to exit the businesses, they said.
“We see risks that multiple regulations, especially the financial-transaction tax, compound to deliver a sharp reduction in FICC revenues in Europe,” said the analysts. “We already see signs of shifts in market share in favor of U.S. investment banks, and we expect this trend to continue.”
Banks including Royal Bank of Scotland Group Plc, Deutsche Bank and UBS AG have been curbing costs by cutting staff and selling assets to meet tougher capital rules under Basel III international standards as the euro area’s fiscal crisis hurts revenue growth. The European Union in February unveiled its proposal for a 0.1 percent financial transaction tax on stock and bond trades and 0.01 percent on derivatives trades with ties to participating countries.
Barclays Plc, based in London, is the only bank in Europe viewed as a “potential winner” of market share, while Credit Suisse Group AG and RBS may lose revenue from the changes, Deutsche Bank said.