Investment banks in Middle East to remain profitable with high growth and increasing competition in 2014, says Frost and Sullivan

February 1, 2014 5:50 am

The global investment banking domain changed significantly since the financial slowdown; the industry that experienced high growth half a decade ago is now stagnant. Investment banks that were considered too big to fail are facing litigation issues that translate into huge costs, affecting profitability. Most investment banks either already announced or are scheduled to announce new strategies and operating models to make the organization leaner, more productive and profitable.

New analysis from Frost & Sullivan, Financial Assessment of the Global Investment Banking Industry, reveals the global investment banking industry is expected to reach a total market size of $2.117 trillion in 2014 at a year-on-year growth of 2.3%. The research analyses companies in the investment-banking sector based on key financial metrics and ratios.

“Investment banks in Africa and the Middle East are characterized by high capital ratios, low reliance on debt, high profitability margins and high return on equity in comparison to its global counterparts,” said Frost & Sullivan Business and Financial Services Senior Analyst Sheetal Kothari. “These banks prove to be safe avenue for investment with scope for high returns. The regional banks have huge growth potential despite increasing competition from multinational banks.”

Deteriorating performance of the global investment banking industry despite huge cost-cutting measures is making the industry less profitable and more risky. In addition, investor confidence and the brand image of investment banks are at an all-time low, quelling expectations of a quick recovery.

The need to comply with regulations from multiple authorities adds to the cost burden, reducing profitability and increasing the complexity of the entire system. This greatly affects small investment banks unable to afford the upgrades or new technologies required for compliance with regulations such as Basel III and the Dodd-Frank Act.

Investment banks must develop strategies, including adapting to new technology, penetrating emerging markets, growing inorganically, revamping pricing mechanisms as well as integrating business units, to maintain performance levels, reduce costs, boost profits, and capture greater market share in this flat line growth industry.

“We expect North American investment banks to face a flat growth period but they could still remain profitable while European investment banks are likely to struggle to remain stable and profitable. Asia pacific investment banks are anticipated to continue remain profitable but may be considered more risky than investment banks in Latin America and the Caribbean that are more stable, risk averse and profitable. Investment banks in Africa and the Middle East are expected to remain profitable with high growth and increasing competition in 2014,” concluded Kothari.

Financial Assessment of the Global Investment Banking Industry is part of the Business and Financial Services ( subscription. Frost & Sullivan’s related research services include: Analysis of the Socially Responsible Investing Funds Market, Financial Analysis and Market Sizing of the Event Management Software Market, Mergers and Acquisitions in the Internet Software and Services Industry, and Financial Assessment of Global Residential REIT Industry. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.

Frost & Sullivan’s Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation and other proprietary research.


Paroma Bhattacharya
Corporate Communications – Middle East and North Africa
Frost & Sullivan
P: +91.22.6607 2047
F: +91.22.2832 4713

Tanu Chopra
Corporate Communications – Middle East and North Africa
Frost & Sullivan
P: +91.22.6607 2046
F: +91.22.2832 4713

Nimisha Iyer
Corporate Communications – Middle East, North Africa, and South Asia
Frost & Sullivan
P: +91.22.6607 2007
F: +91.22.2832 4713