Nomura confirms it: M&A and capital markets businesses are just not very profitable. Macquarie pays head of risk twice head of M

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From efinancialcareers:

Nomura confirms it: M&A and capital markets businesses are just not very profitable. Macquarie pays head of risk twice head of M&A

by Sarah Butcher

If you work in M&A or capital markets (collectively known as IBD), you may be a loss leader. Don't, therefore, expect to get paid anything like your colleagues in sales and trading roles.

There have always been suspicions that M&A bankers aren't great for the bottom line (RBS's don't appear to have been profitable, for example), Nomura's results today confirm this to be so.

Unusually among banks, Nomura breaks out the profitability of its investment banking (defined as capital markets and advisory) division specifically. For three of the four quarters of the year ending March 2012, it made a loss.

Read the rest:

http://news.efinancialcareers.com/94744/Nomura-confirms-it-ma-and-capital-markets-businesses-are-just-not-very-profitable-Macquarie-pays-head-of-risk-twice-head-of-ma/

Comments (6)

May 1, 2012

The magical part of this is that these units will be cut to the bone just in time for the business cycle to pick up...hold on to your hats for hiring spree in 2015/16/17

May 1, 2012

Sarah is posting about actual finance for once in her life rather than spewing out garbage taking from FB intern groups.

On the other hand, UFO, do you really think they're going to cut and then bulk up? Wasn't this the mindset back in 08 when people said that 12/13 would be a hiring spree. You can never predict these factors but like most things, vaguely cyclical, there could be hope and despair.

May 1, 2012
Rumplesmoothspin:

Sarah is posting about actual finance for once in her life rather than spewing out garbage taking from FB intern groups.

On the other hand, UFO, do you really think they're going to cut and then bulk up? Wasn't this the mindset back in 08 when people said that 12/13 would be a hiring spree. You can never predict these factors but like most things, vaguely cyclical, there could be hope and despair.

I think Nomura is going to sell off the entire banking business. My guess is that 2013 onward will see business pick up for good. Personally, I did not forsee banks starting hiring in 2008/9, and the trading gains surprised me...but I'm not in trading, so I can't really go there.

May 1, 2012

Jeez, head of risk paid twice as much as head of M&A? Times sure have changed.

May 1, 2012

Well the problem with advisory and capital markets is that it's a high fixed cost business. If you're like Macquarie and Nomura who are emerging players, they are building out teams without getting attached revenue right away. If they stick with it, I'm pretty sure profitability will increase in the next few years. Same thing happened when BofA was expanding in the early 2000s.

May 2, 2012
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