Wall Street is beating out London’s City and other European financial centers as U.S. banks benefit from a stronger domestic economy and tighter regulations abroad.
“The U.S. firms are a step ahead in terms of capital and leverage,” Dutch asset manager Patrick Lemmens told Bloomberg. “As European banks are expected by investors to show improved profitability, capital and leverage ratios, they are shedding the least-profitable businesses, but this still leads to lower revenue.”
Total revenues from securities units in top U.S. investment banks rose 24 percent from last year, more than doubling the 11 percent gain scored by Europe’s biggest banks, according to an analysis by Bloomberg. Revenue from fixed income, currencies, and commodities trading rose 12 percent at the top five U.S. banks but fell eight percent at eight leading European banks, according to Bloomberg data.
Macroeconomic factors like a contracting euro zone economy, a bullish Standard & Poor’s 500 index, and an ongoing sovereign debt crisis all contributed to the differing fates of the world’s two most important financial sectors.
European banks have also moved to shrink assets as regulators require higher leverage ratios, which compare equity assets to other assets. Banks like Barclays PLC (LON:BARC), Deutsche Bank AG (FRA:DBK), and UBS AG (VTX:UBSN) are all cutting assets in the coming year.
In the corporate banking market, too, U.S. banks are winning. U.S. firms won 33 percent of all fees for stock offerings, mergers advice, and bond underwriting in the second quarter, in their best performance since 2008. European banks won less than 30 percent of such fees, according to data from New York research group Freeman & Co.
The mergers and acquisitions market in North America was also larger this year than its European counterpart, and grew slightly. In Europe, the market for corporate takeovers declined slightly.
“The place you want to focus in terms of making money is the Americas,” said Jim Amine, Credit Suisse Group AG’s (VTX:CSGN) global head of investment banking, to Bloomberg Television, discussing banking fees.