- Bank of America Merrill Lynch is adding bankers to capture more middle-market deals in the US, CEO Brian Moynihan said Tuesday.
- Moynihan said the bank left a hole in its high-end midsize deals coverage in US and lost market share, contributing to the firm’s decline in investment banking revenues in 2018.
- Investment banking revenues slipped 20% in the first nine months, and Bank of America dropped from 4th to 9th in the US M&A league tables.
- “We’ve got to come back and take our deserved share out of the US. That’s where the opportunity is and they’re after it. And we feel good – we’re seeing it come through,” Moynihan said.
Bank of America Merrill Lynch has had a rough year in investment banking, as revenues have declined and group head Christian Meissner announced his departure in September. But the company believes they have diagnosed the problem and are on their way to correcting it.
The solution, according to CEO Brian Moynihan: adding bankers to win back middle-market mergers-and-acquisitions revenues in the US, an area the bank overlooked and lost market share in.
Speaking at a financial conference on Tuesday, Moynihan said his firm is “adding some capacity” to go after the higher end of middle-market investment banking, an area where the bank wasn’t claiming as much of the market as he thought it should have.
Through the first nine months of 2018, investment banking revenues declined sharply, falling 20% from $US2.7 billion to $US2.1 billion. That led Moynihan and CFO Paul Donofrio to call out the division on second- and third-quarter earnings calls, saying “we can do better.”
The US market was the epicentre of the pain, particularly in M&A. While the bank crushed the competition in IPOs, it fell to 8th on the league tables in US M&A fees through the first three quarters, down from fourth in 2017, according to Dealogic. That puts them behind smaller competitors like Barclays, Jefferies, and Credit Suisse.
Moynihan pinpointed the dwindling market share in the US on mid-size transactions, saying the firm left a gap in its investment banking coverage.
“What we observed I think largely was as we really fine-tuned the quote customer list, coverage list, we may have left a hole in the United States. So we’ve been feeding back into that hole,” Moynihan said.
While the firm’s coverage of the higher end middle-market deals improved elsewhere in the world over the past five to seven years, it fell by the wayside in the US. Moynihan said Matthew Koder, Meissner’s replacement as head of the corporate and investment bank, is working on filling out that team to steal back their fair share of deals.
“We’ve got to come back and take our deserved share out of the US. That’s where the opportunity is and they’re after it. And we feel good – we’re seeing it come through,” Moynihan said.
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