Chinese investment banks face new headwinds
Chinese investment banks face new headwinds
Slowing domestic bond markets have hit fee revenues for mainland groups
OCTOBER 25, 2017 by Laura Noonan and Don Weinland in Hong Kong and Gabriel Wildau in Shanghai
Booming debt markets and extravagant trading fees made China’s investment banks the envy of many global rivals for the last few years.
Not any more.
Revenues from China’s onshore bond market this year are down at half their 2016 level, partly because of government policies to discourage a dangerous build up in debt.
As a consequence, Chinese banks are losing ground on the global stage, according to a Financial Times analysis covering more than 60 institutions ranging from market leaders Bank of China, Citic Securities and Haitong to smaller ones like Dragon Securities and Hengtai Securities.
After more than trebling from 2013 to 2016, Chinese banks’ share of the world’s investment banking spending fell sharply in the first nine months of 2017, fee data from Dealogic show.
At the same time, the lucrative brokerage fees powering the Chinese banks’ sales and trading business — the industry’s single largest revenue source — have plummeted after deregulation led to brutal competition and falling fees.
Trading revenues for 33 mainland listed investment banks were 27 per cent lower in the first half of 2017 than a year earlier, according to the latest data from Wind Information compiled from exchange filings.
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