The top investment banks in Europe, the Middle East and Africa--led by Deutsche Bank, JP Morgan and Goldman Sachs--are pulling away from the competition and grabbing a bigger slice of fees generated by companies and issuers in the region than at any time since 2002.
The top three secured 21.9% of fees in the region in the first nine months of the year, up from 17.5% in the same period a year ago, according to data from Dealogic.
It was the top three's highest market share since 2002. The top five banks, made of those three plus Citigroup and Morgan Stanley, claimed 31.3% of fees, also the highest share since 2002.
Philippe Morel, a senior partner at the Boston Consulting Group, said the concentration of market share was driven by equity and debt capital markets, and was likely in the early stages of taking hold as a trend. He said debt capital markets in particular required balance sheet and distribution, and that "requires scale and therefore is driving concentration."
He added: "You are taking risk. You need balance sheet and capital to do that. You need a big distribution network and power, and this is where being big, and being a leading bulge bracket, makes a difference."
In addition, ongoing consolidation in the cash equities market, where the cost of maintaining baseline infrastructure for a global firm is between $3 billion and $4 billion, according to UBS analysts, has led to a concentration of market share on the primary side of the business.
There is a similar dynamic at work globally. The top three investment banks by fees, which are JP Morgan, Bank of America Merrill Lynch and Goldman Sachs, now have a combined fee share of 22.7%, the highest since 2008. Meanwhile, the top 10 have a market share of 55%, the highest since 2007.
Although there is movement within the data each year, as banks move up and down the rankings depending on market conditions and bank strategy, the figures highlight the growing concentration of market share among those banks that have decided to stay the course in investment banking.
Several banks have withdrawn or downsized in certain business lines or regions in recent years, with UBS downsizing in fixed income and Royal Bank of Scotland exiting from mergers and acquisitions and equity capital markets, for example. However, the market share ceded by those to have exited certain businesses is not being shared equally among the remaining players.
While the combined market share of Deutsche Bank, JP Morgan and Goldman Sachs is up 4.4 percentage points on last year, the market share of those banks ranked from four to 10, at 29.5%, is up less than 1 percentage point, and on a par with the figure for 2011.
Leon Saunders Calvert, head of banking and research for EMEA at Thomson Reuters, said: "The few that are [full-service global investment banks], the very few that are, are going to run away with it in terms of their share of fees, with the exception of M&A, where there is a lot more players."
In a note published last month, UBS analysts led by John-Paul Crutchley said that the bulge bracket, made up of eight to 10 banks for the last decade, was likely to shrink to three to five that can compete globally across business lines.
All of the banks inside the top 10 by fees either declined to comment or did not return calls seeking comment.