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Goldman Sachs Is Gaining Investment Banking Share

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Investment banking

Volatile equity markets and lower corporate taxes have led to lower underwriting issues, including equity and debt, in the first half of 2018. JPMorgan Chase (JPM) is still first in the investment banking wallet fee share. However, JPMorgan Chase’s fee has also declined on an absolute basis in the first quarter.

Goldman Sachs (GS) has gained market share in structured debt financing. The bank could benefit from volatile times and see more debt underwriting. Placements through equities have become subdued in recent months. Goldman Sachs posted 5% growth in investment banking revenues to $1.8 billion in the first quarter. The growth was mainly due to equity and debt underwriting. The growth was partially offset by weaker revenues from other strategic transaction advisories.

Banks (XLF) are expected to see subdued growth in investment banking transactions mainly due to lower debt underwriting amid rising rates and lower corporate taxes.

In the second quarter, Goldman Sachs could benefit from private placements of equities and structured debt underwriting—partially offset by weaker global mergers and acquisitions. Morgan Stanley (MS) is focusing more on underwriting transactions compared to strategic transactions.

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Trends and drivers

Among other major banks, Bank of America (BAC) has improved its wallet share due to debt underwriting. Bank of America is providing tough competition for traditional majors by focusing on diversified offerings under one shop.

Goldman Sachs could focus on completing mergers in the second quarter, which could help it revive financial advisory fees. The bank could focus on structured debt transactions and leveraged finance amid improving yields on debt funding.

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