WWW.IBISWORLD.COM Investment Banking & Securities Dealing in the US June 2019 1 Wealth wishes: Rising interest rates are expected to continue benefiting industry revenue growth This report was provided to Seattle Pacific University (2134440152) by IBISWorld on 03 December 2019 in accordance with their license agreement with IBISWorld IBISWorld Industry Report 52311 Investment Banking & Securities Dealing in the US June 2019 Anthony Gambardella 2 About this Industry 17 International Trade 33 Operating Conditions 2 Industry Definition 18 Business Locations 33 Capital Intensity 2 Main Activities 34 Technology and Systems 2 Similar Industries 21 Competitive Landscape 35 Revenue Volatility 2 Additional Resources 21 Market Share Concentration 36 Regulation and Policy 21 Key Success Factors 37 Industry Assistance 3 Industry at a Glance 21 Cost Structure Benchmarks 23 Basis of Competition 38 Key Statistics 4 Industry Performance 24 Barriers to Entry 38 Industry Data 4 Executive Summary 25 Industry Globalization 38 Annual Change 4 Key External Drivers 38 Key Ratios 6 Current Performance 26 Major Companies 39 Industry Financial Ratios 9 Industry Outlook 26 JPMorgan Chase & Co. 11 Industry Life Cycle 27 Morgan Stanley 40 Jargon & Glossary 28 Bank of America Corporation 13 Products and Markets 30 Citigroup Inc. 13 Supply Chain 31 The Goldman Sachs Group Inc. 13 Products and Services 32 Credit Suisse Group 15 Demand Determinants 16 Major Markets www.ibisworld.com | 1-800-330-3772 | [email protected] WWW.IBISWORLD.COM Investment Banking & Securities Dealing in the US June 2019 2 About this Industry Industry Definition This industry is composed of companies and (trading their own capital for a profit) to individuals that provide a range of securities varying degrees. Investment banking services, including investment banking and services include securities underwriting and broker-dealer trading services. They also corporate financial services, while trading offer banking and wealth management services include market making and services and engage in proprietary trading broker-dealer services. Main Activities The primary activities of this industry are Underwriting, originating or maintaining markets for securities issuance Principal and proprietary trading Providing corporate strategy advisory services Providing corporate finance services The major products and services in this industry are Advising fees Underwriting services (equity) Trading and related services Underwriting services (debt) Other Similar Industries 52312 Securities Brokering in the US Operators in this industry act as agents in buying or selling securities on a commission or transaction fee basis. 52391 Venture Capital & Principal Trading in the US Operators in this industry primarily buy and sell financial contracts (e.g. securities) on their own account. 52392 Portfolio Management in the US Operators in this industry manage financial portfolios. 52599 Private Equity, Hedge Funds & Investment Vehicles in the US Operators in this industry manage collection-investment vehicles that invest in a broad range of asset classes. Additional Resources For additional information on this industry www.sifma.org Securities Industry and Financial Markets Association www.thomsonreuters.com Thomson Reuters Corporation www.federalreserve.gov US Federal Reserve Provided to: Seattle Pacific University (2134440152) | 03 December 2019 WWW.IBISWORLD.COM Investment Banking & Securities Dealing in the US June 2019 3 Industry at a Glance Investment Banking & Securities Dealing in 2019 Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24 Snapshot $133.1bn 2.6% 2.3% Profit Wages Businesses $35.3bn $44.4bn 11,182 Revenue vs. employment growth Corporate profit Market Share JPMorgan Chase & 10 12 Co. 5 13.0% 8 0 Morgan Stanley 4 -5 9.6% % change % change 0 Bank of America -10 Corporation -15 -4 9.1% Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25 Citigroup Inc. Revenue Employment 8.8% SOURCE: WWW.IBISWORLD.COM The Goldman Products and services segmentation (2019) 7.5% Sachs Group Inc. Underwriting services (equity) 8.4% 8.1% p. 26 Other Key External Drivers 11.3% Corporate profit Underwriting services (debt) Initial public offerings 59.1% Trading and related services S&P 500 Investor uncertainty 14.0% Advising fees p. 4 SOURCE: WWW.IBISWORLD.COM Industry Structure Life Cycle Stage Mature Regulation Level Heavy Revenue Volatility Low Technology Change High Capital Intensity Low Barriers to Entry High Industry Assistance High Industry Globalization High Concentration Level Medium Competition Level High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 38 Provided to: Seattle Pacific University (2134440152) | 03 December 2019 WWW.IBISWORLD.COM Investment Banking & Securities Dealing in the US June 2019 4 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary Strong returns in various financial explaining the industry’s declining markets and continued macroeconomic revenue from FICC, the most significant growth have benefited operators in the of which is regulatory change. Among the Investment Banking and Securities most important legislative changes is the Dealing industry over the five years to Volcker Rule, which restricts bank- 2019. Operators provide underwriting, holding companies with federally insured originating and market-making services deposits from proprietary trading. for a range of financial instruments Additionally, higher capital requirements including bonds, stocks and derivatives. and the trend of transitioning derivative Revenue growth was hindered during trading to central clearinghouses are most of the current period due to anticipated to structurally dampen the structural changes to the trading services industry’s FICC revenue. This trend led that industry operators were permitted to industry revenue growth to remain conduct. However, operators have muted during the early portion of the period, despite rising fees from investment banking services. Operators have benefited from numerous These changes have forced the industry’s trends, including increased demand for initial smaller operators to evolve. Since competing in FICC requires scale and massive public offerings from private companies investments in technology and compliance, boutique investment banks have benefited from numerous trends, alternatively focused on merger and including increased demand for initial acquisition (M&A) advising, increasing their public offerings from private companies. share of this product line from 25.0% in Overall, industry revenue has increased an 2010 to 29.0% in 2014, according to the annualized 2.6% to $133.1 billion over the Economist. As a result, boutique investment five years to 2019, including 4.2% growth banks’ total share of M&A revenue is in 2019 alone. Similarly, industry profit forecast to continue growing over the five has expanded over the past five years, years to 2024. Furthermore, the industry as primarily due to increased advisory fees. a whole is projected to continue benefiting Early during the current period, from continued macroeconomic activity and industry revenue was stymied as a result rising interest rates during the outlook of declining fixed income, commodities period. Overall, industry revenue is forecast and currencies (FICC) trading revenue. to rise an annualized 2.3% to $149.4 billion Several structural trends are crucial in over the next five years. Key External Drivers Corporate profit Initial public offerings Changes in corporate profit influence Investment banks help companies raise the performance of equities markets capital by underwriting their first sale of because they affect how companies are stock (equity) to public investors; this is valued, which in turn influences trading known as an initial public offering (IPO). and business activity. Higher trading A high number of IPOs represents and business activity levels enable increased business demand for capital, investment banks to earn higher which leads to higher underwriting trading, underwriting and advisory revenue for the industry. The number of revenue. Corporate profit is expected to IPOs is expected to decrease in 2019, increase in 2019. posing a threat to the industry. Provided to: Seattle Pacific University (2134440152) | 03 December 2019 WWW.IBISWORLD.COM Investment Banking & Securities Dealing in the US June 2019 5 Industry Performance Key External Drivers S&P 500 Investor uncertainty continued The performance of the stock market Investor uncertainty is an important heavily influences revenue for industry measure of business sentiment and affects operators. When equities markets are trading activity. Low investor uncertainty performing well, the industry generates creates a favorable environment for initial more revenue from trading activities and public offerings, mergers and experiences increased demand from acquisitions and trading activity. As a downstream clients for strategic advisory result, declines in this index generally services. The S&P 500 index is expected precede periods of strong industry to increase in 2019, representing a performance. Investor uncertainty is potential opportunity for the industry. expected to decrease in 2019. Corporate profit Initial public offerings 12 100 80 8 60 4 40 $ billion % change 0 20 -4 0 Year 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25 SOURCE: WWW.IBISWORLD.COM Provided to: Seattle Pacific University (2134440152) | 03 December