It hasn't happened like it was supposed to.
When Morgan Stanley and Oliver Wyman released their enormous report on the state of the investment banking industry a few months ago, equities sales and trading was highlighted as an area of particular strength: revenues in cash equities were supposed to rise 5-10%; in equity derivatives they were supposed to rise 10-15%.
Year-on-year, however, equities revenues fell widely in the first quarter. Goldman Sachs, Citigroup, BAML, JPMorgan, Credit Suisse, Deutsche and Nomura, all experienced declines - some of them quite substantial; only BarCap, UBS and Morgan Stanley managed an increase.
Financial News says the lack of action is becoming an issue. Equity volumes across the world's major exchanges were down 30% month on month in April. It quotes the global head of equities at one bank, who says that after last year's big investment in equities banks face a choice: wait and hope that revenues come through, or pull back.
Reasons for optimism
Banks like UBS have already been cutting some members of their research teams.Evolution has made some more cut throat eliminations.
However, equities headhunters say it's really not that bad.
"There's been no blood- letting, but some of the less important sectors are definitely out of fashion," says Jonathan Evans, chairman of Sammons Associates. "On the other hand, there's still appetite to hire researchers to cover utilities, natural resources and some financials - insurance in particular."
An equity researcher at one international bank in the City says figures for April were always going to look dismal.
"April was unique this year because of the low number of trading days," he says. "If April's low volumes continue into the rest of the year then yes, costs will be too high and there will need to be cuts. But I suspect this won't be the case."
Reasons for pessimism
On the other hand, margins in equities sales and trading are so low that it won't take much to force banks to impose cuts.
Brad Hintz, an analyst at Bernstein Research puts the margin in equities sales and trading businesses at around 13.5%. At banks like Goldman Sachs, Morgan Stanley - and to a lesser extent JPMorgan and Credit Suisse - Hintz says this is bolstered by the equity underwriting business, which brings flow.
The problem comes at banks where the equity underwriting business isn't that strong.
"If you're working for a firm that doesn't have a large equity underwriting franchise - like Nomura in the US, BarCap in Europe, SocGen, or BNP, low commission levels are going to create pressure for better performance," says Hintz.
"At some point, someone will say it's time to cut costs," he adds. Equities professionals need to start hoping for a significant improvement.