The pandemic was devastating to major economies, there is no mistaking that. Markets saw it strike first-hand as the stock prices plummeted devastatingly low and the revenue at global investment banks was more slow than gradual, all routes clogged due to the gravity of the situation.
Apart from that event spanning through countless economic shattering, Russia’s charge against Ukraine and the monetary tightening opened the gate to eruptive and uncertain trading led by financial markets in 2022. On one end of things, it aided in trading bulk, on the short side of the deal it held back Initial Public Offerings (IPOs) and business closures in need of a sign by Special Purpose Acquisition Companies (SPACs). Stephen Biggar, belonging to Argus Research, has stated that the IPOs are scarce, and the SPACs are barely in existence anymore. The next quarter is surely set to be another sombre quarter for investors and buyers.
Statistics do prove that 2021 saw the financial market in better spirits. An impressive $132 billion was the whole net revenue for global investment banking last year. However, 2022 brought along a hoard of fearful factors to the banking sector. Its net revenue plunged to $35.6 billion ever since, falling by nearly 38% from the $57.4 billion it didn’t manage to secure in a year span of time.
Meanwhile, banks have held discourses on the popularity of investment banking losing its crowd—though not a major part of it. Banks will be able to cut the losses short, credited to their past closed deals of equity and fixed income, currency and commodities (FICC) trading volume, which have gained strength to persevere this year than the last because of the recent sensitive conditions. Biggar stated that overall, the quarter is likely to generate a much lower gain than anticipated.
As the markets are at the edge of their seats trying to persist through the Credit Suisse crisis warning on Wednesday, banks are preparing to meet the challenging monetary conditions.
The insinuation that there will be below satisfactory levels of capital markets and a broadening of credit spreads had left the investing banking division in a toil it is not capable of freeing. Credit Suisse itself has suffered through a shocking number of billions of losses last year, and hot on its heel is a legion of legal proceedings.
While North American banks are dealing with their share of problems, they hand their report on Fitch Ratings to Christopher Wolfe—who commented that the slowdown in the economy would lay bare the capital markets. In terms of its downturn, what would most likely deal with the finishing blow and handle exposure are investment banking and asset management.
Keefe’s Bruyette & Woods has the analyst Michael Brown, who explained the situation through an analytical lens. He clarified that debt capital market deals, coupled with equity capital market activities such as IPOs are dormant.
China as a leading business market that was affected by various sources recently has seen such cases; the root cause being its administrative withdrawals and the economic puncture, with Hong Kong’s financial hub failing to withhold the IPOs value. It plummeted 90% so far in 2022 in comparison to last year. An anonymous capital market banker, whose identity was omitted out of respect for his privacy, had revealed that job cuts are an inevitable outcome if the markets remain volatile and it lays idle in terms of the deal process. Countless banks situated in Hong Kong hired a lot at the beginning of the year. Nonetheless, with perseverance, the country may be able to avoid another economic halt.
