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Biggest U.S. Banks Expand Trading Dominance Over European Rivals By Bloomberg


© Reuters. Largest U.S. Banks Increase Trading Dominance over European Rivals

(Bloomberg). — The coronavirus is helping the large get larger across all industries and regions. A trio of U.S. banks are capturing market share in European trading revenues from European counterparts.

Goldman Sachs Group Inc (NYSE:)., JPMorgan Chase & Co. (NYSE:) and Morgan Stanley Bloomberg data shows that the NYSE captured nearly 46% of global trading stock and bond markets in the first half 2021. This is almost six percentage point more than the 2019 period. However, European lenders accounted for only 32% of the global market, which is roughly four percentage point less than the previous year. Deutsche Bank AG (NYSE: HSBC Holdings Plc (LON:) ceding ground.

America’s biggest financial institutions are building on their gains with huge technology budgets and their equity market dominance, which allowed them to benefit when the pandemic sparked the most volatile period on record. After recovering faster from 2008’s financial crisis, the U.S. banks are now encroaching upon European territory more than 10 years ago.

“In times of uncertainty over the last year and a half or so, the big players have been able to step up,” said Barclays Jason Goldberg, Plc analyst. “The biggest U.S. banks have been able to capture more than their fair share as they leverage both relationship and technology. I don’t see them going backward.”


According to data, the U.S. trio is increasing their market share from at least 2017. The data compares revenue from twelve U.S. banks and 12 European banks during the first half each year. They seized almost five percentage points more in the six-month period between 2019 and 2020. This brought their total share of the market to close to $40 billion.

Goldman Sachs was at the top of this list. It has increased its market share by over five percent since 2017. This is more than any of the other 12 banks. 

Marc Nachmann, who is the head of New York’s trading section at Goldman Sachs, says that Wall Street’s biggest player was able to seize more market share because it increased its technology investments, and put emphasis on individual client relationships over single transactions.

“We’ve made a conscious decision to invest in technology in lots of parts of our business,” Nachmann said in an interview. “It becomes a scale game. You have to be able to afford to keep up with the technology spend to be one of the top performers.”

According to the presentation from that year, Goldman Sachs spent $4 billion on technology in 2019. JPMorgan is increasing its technology investments and has an overall tech budget totaling $12 billion, not including its retail operations. Morgan Stanley’s Chief Executive Officer James Gorman said in June that its tech budget is well over $4 billion.

Return to Normal

Wall Street’s biggest banks raked in massive hauls from trading as the pandemic roiled markets and the Federal Reserve’s rescue measures bolstered asset prices. The string of record quarters ended in June after bank executives warned that the activity would resume normalization. When banks report their third quarter earnings next week the focus will shift to whether this trend continues. 

Alison Williams from Bloomberg Intelligence believes that increased revenue streams can lead to intensified competition over global trading. 

“As things start to stabilize and some of that liquidity comes out of the system, there could be less activity,” Williams said. 

Deutsche Bank (DE 🙂 in Europe saw the greatest market share decline from 2017 to 2021. It was the result of its 2018 exit from the global equity business. In the first six months 2021, after having lost 3.1 percentage points over five years, Deutsche Bank began to recover some. It recouped only 0.8 percent.

Barclays Plc, the sole lender that was surveyed in the area, had the highest market share between 2017 and 2021. This is due to its strong foothold on U.S. capital market.

U.S. lenders’ bigger inroads into the European market will probably soon give way to more incremental gains, a trend analysts attributed to politically disruptive issues such as Brexit as well as the over-banked nature of the market, with its lower margins.

Europe is “not a good hunting ground for banks in the global market,” said Tim Jennison, a partner at Boston Consulting Group. “I still think the American banks will continue to gain share — if not as dramatic in Europe, then the market will continue to gain share in Asia.”  

Signs of a possible return to pre-pandemic levels may be already evident. The data shows that 31.6% of market share was held by European banks in 2020’s first half. This figure has not changed for the second half of 2019. The share of U.S. banks in total declined slightly from 68.4% to 68.38% during the first half 2020.

“The European banks’ resolve to stay committed to investment banking has been amazing — it’s remarkable, in light of the subpar returns and lost market share,” Mike Mayo, a bank analyst at Wells Fargo (NYSE:) & Co., said in an interview. But for now, “Goliath is winning.”

©2021 Bloomberg L.P.