Wall Street Titans Are Winning on European Banks' Home Turf

European investment banks are being pushed back on almost all fronts in Europe by their Wall Street rivals, and that is before the recent bugle call signaling a further retreat.

The five American investment banks in the global top 10 saw their share of European revenues increase from 48% in 2012 to 53% in 2014, according to figures compiled for The Wall Street Journal by Coalition, the business intelligence firm. The increase was even higher in fixed income, which covers trading in bonds, currencies and commodities, with the share rising from 47% to 53%. In advisory banking, Wall Street has advanced from 53% to 55%.

Only in equities, have the five European banks kept their noses in front, holding their market share at 51%.

Total revenues for the top 10 banks in Europe were down 6% at $23.7 billion.

The American investment banks outstripped the Europeans in the aftermath of the financial crisis as their domestic market recovered more quickly. More recently, the Wall Street banks have pulled further ahead as they have gained market share in Europe.

James Cowles, Citigroup’s chief executive for Europe, Middle East and Africa, said in an interview that the Wall Street banks had reacted more quickly to the financial crisis and were now benefiting from that head start.

“The U.S. banks started doing their restructuring, they started dealing with their balance sheets and they started deciding what businesses they were going to be in earlier than the European banks which are now going through that process. As a result, the American banks are now realizing the benefit of having that clarity of strategy,” he said.

Royal Bank of Scotland Group plc recently announced plans to cut back its investment bank further, while the recent appointment of Tidjane Thiam as the new chief executive of Credit Suisse Group AG has prompted speculation that he may refocus its investment bank.

Further jobs are set to go at Barclays PLC and Deutsche Bank AG, the biggest of the Europeans that has so far resisted big cuts to its investment bank, is about to unveil a new strategic plan.

Viswas Raghavan, head of banking for Europe, the Middle East and Africa at J.P. Morgan Chase, said that U.S. banks were benefiting from the scale of their strongly recovering home market. “There is also a trend for companies to reduce the number of banks they deal with,” he said.

Explaining the Europeans’ loss of share in fixed income, Paul Johny, director of research and analytics at Coalition, said this was the area where there has been most regulatory pressure, including the new rules requiring banks to hold much more capital in certain business. It is also easier to exit certain product lines in fixed income, whereas most banks believe it is necessary to have a broad presence in equities.

Mr. Johny added that he expected the trend of increasing American dominance to continue over the longer term. However, the Europeans may make up some ground this year because of the strength of European government bond and currency trading, where the Europeans tend to be relatively stronger.

The top ten banks in Coalition’s figures are Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and UBS.