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March 16, 2010 12:39 PM EDT
Global investment banking revenues this year may match the buoyant levels of 2009, analysts forecast on Tuesday, easing fears of a sharp drop during what is likely to be a "pivotal" year for the industry.
Underlying industry revenues are likely to drop 10-15 percent this year, but will be "modestly" higher once lower markdowns for credit losses are factored in, according to a report by Morgan Stanley and Oliver Wyman.
In a linked note, Morgan Stanley said the new backdrop favoured banks with big market share and Barclays
Revenues had been expected to drop more sharply from levels seen in 2009, when income soared early in the year as capital markets bounced back from the financial crisis.
Looming regulatory changes and a fragile economy will challenge profitability and reshape the industry, the report said. "This will reinforce the need for players to compete hard for share and improve trading efficiency.
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"Banks will need to reposition around regulatory change, compete on scale, build outstanding risk management, and take clear decisions on reshaping the business," the Morgan Stanley/Oliver Wyman report said.
Underlying fixed income, commodities and currencies trading (FICC) revenues could drop 20-25 percent this year, but lower writedowns will make good much of the decline, the analysts forecast.
Equity trading revenues should rise 5-10 percent and income from advising on mergers and acquisitions (M&A) and the rest of the "investment banking" sub-sector should rise 5 percent, the report said. (Reporting by Steve Slater; Editing by Antonia van de Velde)
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