By Luke Jeffs and Sarah White
LONDON April 20 (Reuters) – Europe’s banks and stockbrokers
may be forced to cut or scrap equity research and trading units,
to reduce their exposure to a market that is an increasing drag
on their ailing businesses.
Most have already cut staff in equities trading and, with no
signs of a recovery, are starting to question more fundamentally
their commitments to what used to be one of their core services.
“If the lower volumes of the last five years continue, the
industry will inevitably see further withdrawals and reductions
that will change the competitive landscape in the equities
market,” said Sam Ruiz, who heads Nomura’s equity unit in the
Europe, Middle East and Africa region.
The financial crisis has unnerved investors who have
responded by cutting their investment in shares, causing the
global equity market to trade at about a third lower than the
pre-crisis highs for the last three years.
Already battered trading volumes dipped another 20 percent
in the first quarter of the year, according to the World
Federation of Exchanges, while competition between firms means
commissions on executing trades are razor-thin.
HSBC’s top equities boss, Patrick George, predicted last
month volume would never return to the heady, pre-crisis days,
making an industry shakeout inevitable.
For many smaller stockbroking firms — a historical
cornerstone of the London financial market and which rely on
commission for revenue — the long-term downturn and small
margins are a killer.
Some have fallen prey to consolidation. South African
investment bank Investec, for instance, bought securities house
Evolution last year, and broker Collins Stewart Hawkpoint has
been absorbed by Canada’s Canaccord.
Continued…
