Lehman Brothers Competition
Now Viewing Lehman Brothers's competition in: Investment Banking (primary)
Recent Developments
Troubled Investment Banks Cut Staff - Continuing problems in the banking and finance industries are causing layoffs at investment banks. Morgan Stanley announced plans in November 2008 to cut 10 percent of staff in its institutional securities unit and 9 percent in asset management. Goldman Sachs began a 10 percent staff reduction program in late 2008. More than 100,000 financial services jobs have been eliminated worldwide since 2007, according to Reuters.
Major US Investment Banks Change Status - Both Morgan Stanley and Goldman Sachs converted to bank holding companies in September 2008. Experts say the banks will look much like commercial banks, with significantly tighter regulations and much closer supervision by bank examiners from several government agencies. Both Morgan Stanley and Goldman Sachs will gain greater access to government-sponsored financial assistance programs in exchange for federal oversight.
Small Banks Profit from Big Banks' Misfortune - Small US investment banks may benefit from the problems affecting large Wall Street firms such as Goldman Sachs, according to BusinessWeek. Securitized mortgage products that have weakened or caused the collapse of the larger banks weren't a problem for smaller banks that didn't take risky debt onto their balance sheets. The smaller banks are now well-positioned to hire talent fleeing from rivals and to win a larger piece of the advisory business, such as providing counsel on mergers and restructuring.
Competitive Landscape
Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries. Although labor-intensive, the industry produces very high value: average annual revenue per employee at large firms is close to $1 million.
Investment Banking Industry Forecast
from Hoover's/D&B subsidiary First Research
The output of US securities, commodity contracts, and investments, an indicator for investment banking, is forecast to grow at an annual compounded rate of 4.1 percent between 2008 and 2013.
Securities, Commodities, and Investment Growth Level
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
First Research Opportunity Rating
The First Research Opportunity Rating is First Research's estimate of industry performance vs. industry risk over the next 12 to 24 months.
- Demand: Baby boomers have more money
- Need good marketing
- Risk: Falling asset values reduce fees
Industries Where Lehman Brothers Competes
- Financial Services
- Investment Banking
- Large-Market Investment Banking (primary)
- Asset Management
- Securities Brokers & Traders
- Currency, Commodity & Futures Trading
- Investment Banking
