With all the talk of layoffs and pay cuts, who'd think investment banking has actually been growing these last few years?
Apparently, that's the case. Financial News says the industry today is "more concentrated and more efficient." It has higher margins - 38.8 percent pre-tax, on average, compared with 37.1 percent in 2007 - and a higher return on margins than it had before the credit crisis hit. Revenues in the first half of 2010 were down less than 15 percent when compared with the same period of 2007. Pre-tax profits were down less than 11 percent.
We're sure this all makes everyone feel much better, though probably not those holding the 20 percent of bank positions - 21,000 jobs - that were eliminated. Most of those came from the Bear Stearns-JPMorgan deal. And compensation fell by more than a third - 36 percent. Still, it's worth noting that Goldman Sachs and Credit Suisse have increased headcount over the last few years.
Equities trading took the biggest hit in terms of revenue - down 42 percent, or $16 billion, between the first halves of 2007 and 2010. (That accounts for nearly two third of the revenue drop across the industry.) Investment banking revenues fell 30 percent, or $9 billion. On the flip side, revenues from fixed income, commodities and currencies rose 6.3 percent, to $60 billion.