Investment Banking In The Times Of COVID Pandemic

Business

At present, as a global community, we are fighting a globally active pandemic called COVID-19, and the fact of the matter is that it has affected every single industry known to mankind. Investing banking is no exception. Now, it has been well-established that no matter how progressive the technology has gotten, or how far we have reached as a race, we are still not immune to a pandemic, by any means.

Scientists and health workers across the globe has been beaten badly by the coronavirus, and it’s the just damage-control part that is being taken care of. Research has been going on for more than six months as of now, to find, or develop, a vaccine for the virus, but all the efforts till now seem to have failed.

Across the globe, thousands and millions of professionals in the banking sector, have lost their jobs. However, there is no need to panic, because as and when the economy revives, the job market will again reopen, and there will exist opportunities. However, those who have recently graduated, must prepare in advance for the upcoming opportunities that can arrive in the next three to six months. It would be highly advisable to enrol in an investment banking certification program that will offer you a distinct competitive advantage, once the job market reopens.

The State of Investment Banks Amid COVID Pandemic

Investment banking is one such industry that has been significantly affected by the economic adversities of the virus outbreak. Already, the investment and finance industries are infamous for being highly volatile. And on top of that, the virus acted as a catalyst. The banking industry has gone into a phase of recession, not like 2008 one, but still, intense enough to destroy thousands of banking jobs and careers.

Pandemic preparations by the top guns in the banking sector

Investments banks in the US that are considered a force to reckon with in the financial services sector (JP Morgan & Chase), have accumulated a reserve of dry powder of about USD 7 billion to get immune from the hassles of bad debts & loan defaults in the much testing times that await in the near future. However, it has led to a heavy decline in profits in the first quarter of this year, which amounts to two-third less than what it was in the 1st quarter of 2019.

The talked about $7 billion that have been kept as cover by the banking industry in the U.S., includes $4.5 billion coming from direct contribution by prospective consumer loan defaults, as a result of surging unemployment rates in the country. JP Morgan Chase’s net revenues fell to an astounding $2.87 billion in the quarter that ended March 31st. Added to that, the other big players like Wells Fargo also posted a considerable decline in their 1st quarter’s profit-making. 

What Does the Stats and Studies Say About the State of Banks

Impact of COVID pandemic on profits/revenues of U.S. financial services firms 2020

Talking about the impact of pandemic on the profits/revenues of American financial services firms this year, Statista, a globally-renowned market research, concluded – 92% of the CFOs across the financial services firms in the U.S. are expecting their company’s profits/revenues to go down significantly in the wake of the corona-led economic adversities.

If research findings are to be believed, the combined banking revenues have fallen down by 33% in the quarter 1 of 2020. The present revenue estimates stand at USD 222 million which is the lowest since 2016. Also reported were the downturns in the M&A advisory fee.

Concluding Thoughts

The banking revenues have fallen significantly across the globe as a result of the economic downturn in the financial services sector, led by the COVID pandemic. A heavy decline in the M&A deeds was observed across the Asia Pacific region (Japan being an exception), in comparison to the last year’s statistics. Investment banks, in their preparations against the further adversities that the epidemic can bring about in the future, have set aside a major chunk of their profits.

Leave a Reply

Your email address will not be published. Required fields are marked *