World Economy

EU Banks Fighting a Rising Tide

EU Banks Fighting a Rising TideEU Banks Fighting a Rising Tide

European Union banks just can’t catch a break. Many of them are still slogging uphill to recoup share price losses incurred from the Brexit vote in the UK.

European investment banking revenue overall is down 23% this year compared with the same period in 2015, according to data tracker Dealogic. And all are lagging behind US banks for wallet share, or how much revenue they take in from deal-making compared to competitors, CNBC reported.

JPMorgan Chase tops every bank in the EU for wallet share, with 7.3% of deals, according to data from Dealogic this week.

It’s followed by Goldman Sachs, which has 6.2% of deals, and only then, in third place, is an EU bank: Deutsche Bank has 5% of revenue on European mergers and acquisitions. But European banks (and their American counterparts) are fighting off a rising tide of boutique banks that have taken a growing percentage of M&A revenue from them over the last decade.

Around the world, M&A levels have declined from recent record highs. But the pain is exacerbated in Europe, where big banks experienced a steeper drop off in revenue.

Dealogic data shows that investment banking in Germany, for example, is down 45%. Globally, European deals account for just 22% of banking revenue, the lowest margin since Dealogic began tracking investment banking wallet share.

That comes in the wake of banks being hit especially hard on concerns about elevated loan losses, especially those coming from oil and gas assets.

But there is one small silver lining for EU banks. The European Central Bank’s decision to ramp up bond buying, means Europe’s banks may find themselves working on more debt deals that juice their top line.

  Multiple Crisis

As Europe struggles to cope with its sluggish growth, subdued inflation and double-digit unemployment in the aftermath of a far-reaching sovereign debt crisis, the uncertainties brought by Brexit and an ongoing unprecedented refugee crisis are doomed to add renewed pressure.

Experts warn that the prospects of Europe’s economy would continue to remain lackluster in the near future.

Official data showed that growth for Eurozone’s gross domestic product saw a quarterly increase of merely 0.6% in the first three months this year and waned to only 0.3% in the second quarter.

The European Commission, the executive body of the European Union, has recently cut the economic outlook for the 19-country Eurozone, projecting growth of the single currency bloc not reaching more than 1.6% for this year, a notch below the earlier 1.7% estimate.

Inflation, a figure closely watched by the bloc’s central bank, turned out to be 0.2% in July, up from the 0.1% one month earlier.