The U.S. is actually making a financial comeback, which is good news for investment bankers. Housing prices and investment are on the rise and, thanks to a recovery in home values and stock prices, the total net worth of the average household is currently standing far above its 2007 peak. Americans are 9.8 trillion dollars richer than they were in 2013 (although this may have a lot to do with the amount of stocks held by wealthier individuals, which has been causing this boom). Mergers and acquisitions activity fueled by cheap debt has helped create more activity in the markets.
Natural gas and oil production is also up in the U.S., which means that the country now has much more coal to export. In fact, coal exports in 2014 are more than double what they were in 2009. The investment bankers who benefit the most in 2014 are those who are working the primary capital markets.
Equity Capital Markets
Equity capital markets are a good place for investment bankers to be at this stage, especially when looking at recent developments. Credit Suisse recently disclosed that it saw an increase in its ECM with a whopping 30 percent in the second quarter though Bob Murley of Credit Suisse Group has said that “As much as I hate to admit this, I don't think the investment banking community is as prominent and as large as it was years ago”. Over the same period, there was a 50 percent increase for Morgan Stanley and 44 percent increase at Bank of America. Even Morgan Stanley experienced an increase of about 50 percent during the same period. Unfortunately, there are a few exceptions to this rule, as demonstrated by JP Morgan's 4 percent drop in revenue and Citigroup's revenue drop of about 31 percent.
Mergers and Acquisitions
Mergers and acquisitions might not have experienced the same revenue increases as equity capital markets, but there is some hope on the horizon. According to Goldman Sachs, there’s a very healthy pipeline of future mergers and acquisitions. Ruth Porat, CFO of Morgan Stanley, commented on the 25 percent increase in mergers and acquisitions revenues it experienced in the second quarter, stating that the bank has a healthy backlog.
Emerging Market CDS Traders
According to Credit Suisse, revenues related to emerging markets have seen a dramatic rise in July of 2014. In the first quarter of 2014, investor worries about events taking place in Russia has caused emerging market CDS trading to rise as high as 93 percent. All indicators point toward the fact that the second quarter might see even more dramatic increases.
Securitization and Mortgage Trading
The second half of 2014 is looking positive for banks with established mortgage trading business as well. Both Credit Suisse and Bank of America saw increases in mortgage trading revenues, with the former even setting their sights on the European asset financing business.