Investment banking revenues may be driven in coming quarters by mergers and acquisitions (M&A) and equities, as the high-grade fixed income boom draws to a close, Credit Suisse analysts said on Thursday.

Banks are hesitant to lend after the credit crunch depleted their capital, and cash-hungry companies have instead sold bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.

This year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more then $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.

However, Credit Suisse said a decline in high-grade fixed-income revenue and a rise in high-yield suggested that the borrowing surge had ended.

The high levels of issuance in the first half of the year will have completed many companies' borrowing programs, meaning that second half revenues are likely to disappoint, a research note said.

Global debt underwriting rose 11 percent to $3.2 trillion in the first half of this year, the largest six-month total since the record-breaking first half of 2007, according to Thomson Reuters data.

Market shares of established players may erode marginally as the healthy profit booked in fixed income entices some players to carefully return to the market, Credit Suisse added.


In spite of talk of green shoots and improving pipelines, the M&A market remains fragile.

Thomson Reuters data showed the value of global M&A transactions fell 40.2 percent to $941 billion in the first half of this year from a year ago, marking the slowest first half since 2004.

We continue to view M&A activity as unimpressive, as divestments by banks, sponsored buyouts and hostile bids have dried up, Credit Suisse said.

However, with heightened capital market activity in the second quarter (historically a precursor for a recovery in M&A activity) we see a cause for optimism.

The bank added that the surge in restructuring M&A, dominated by bankruptcy and distressed situations, had not been enough to drive the overall business.

Equity capital markets have been busy this year because banks have embarked on large rights issues to refill their coffers, with HSBC's $19 billion share issue in April topping the table of large deals.

Credit Suisse, however, said that initial public offerings, a sure sign of a recovering economy, have yet to stage a significant revival.

Earlier this month UK property company Landbank ditched a 250 million pound IPO in favor of a private share placement, a source familiar with the matter told Reuters.

(Reporting by Victoria Howley; editing by Simon Jessop)