European banking executives are anticipating a rebound in dealmaking revenues, but acknowledge that Wall Street rivals have extended their lead, according to a survey by the Association for Financial Markets in Europe (AFME). The survey of 40 senior executives at major European banks found that 70% expect their M&A advisory fees to increase over the next 12 months.
Wall Street Dominance Widens
Despite the optimism, the gap between European and US investment banks continues to grow. US banks now account for 65% of global investment banking fees, up from 55% a decade ago. European banks have seen their share fall to 20% from 30% over the same period.
“The US banks have invested heavily in technology and talent, and it’s paying off,” said a senior executive at a European bank who participated in the survey. “We’re trying to catch up, but the gap is widening.”
Key Growth Areas
European bankers are focusing on specific sectors where they see opportunities, including energy transition, technology, and healthcare. The survey indicated that 60% of respondents expect renewable energy and infrastructure deals to be a major driver of revenue growth.
“There’s a lot of capital looking for green investments, and European banks have strong local expertise,” the executive added. “But we need to scale up to compete with the US giants.”
Regulatory Challenges
European banks also face regulatory hurdles that their US counterparts do not. The survey highlighted that 55% of executives cited regulatory fragmentation across EU member states as a barrier to cross-border dealmaking.
The AFME report noted that “the lack of a single market for financial services in Europe puts banks at a disadvantage compared to US firms that operate under a unified regulatory framework.”
Technology and Talent
To close the gap, European banks are ramping up investments in technology and hiring. However, competition for talent is intense, with US banks offering higher compensation packages. The survey found that 75% of European bank executives said attracting and retaining top talent is their biggest challenge.
“We’re losing some of our best people to US banks,” another executive said. “We need to offer more competitive pay and a compelling vision for the future.”
Outlook for M&A
Despite the challenges, the outlook for European dealmaking is positive. The survey predicted that global M&A volumes could rise by 10-15% in the coming year, driven by low interest rates and corporate restructuring post-pandemic.
European banks are particularly hopeful about activity in the mid-market segment, where they have a strong presence. “We can’t compete for the mega-deals, but we can win in the middle market,” the executive said.
