Corona’s Potential Impact on Investment Banking Industry


Following a considerably weak 2019 for global investment banks in terms of generating revenues, 2020 could prove to be even weaker. The worldwide spread of the pandemic has rattled the financial markets. COVID-19 worries in the capital markets will certainly hurt the market issuances, and will trigger a slowdown, as per the market experts.

Investment banks globally, will bear the impact, more specifically, the European financial firms that were already struggling. The not-so-great first quarter of the last year has had a lasting impact on investment banking revenues that led to the sad ending of 2019. The US investment banking industry recorded its lowest in revenues since the great recession of 2008.

First Quarter of 2020 To Go Weak Amid the Virus’s Adverse Impact

This year’s first quarter for investment banking sector started strong in the early weeks of January, but later, the virus outbreak disturbed the positive growth. The virus-induced market catastrophe in the late February and early March led to the disastrous market selloffs never seen before since 2008 crisis. Commodities and equities prices fell to whole new lows.

Complete Market Meltdown on March 9th

We witnessed a complete market meltdown with a sudden spike in the number of corona-affected people in the US and Europe. The concerns quickly took over the financial markets, and meanwhile, the talks between Russia and Saudi Arabia over oil supply faltered, eventually finishing off with no positive conclusion. As a result, the Stoxx Europe 600 and S&P 500, both witnessed a drop by 7%.

Portfolio Adjustments – The Need of the Hour for Institutional Investors

Stock price falls, and volatility in the financial sector will continue in the next couple of months. Institutional investors will be forced to adjust their portfolios, more specifically, while putting the bonds and equities at sale in the market.

S&P Global Market Intelligence, a highly reputed American corporation that provides for real-time market-analysis data, recently produced a report wherein numerous investment banks from around the world were included as samples. In this report, it said that the global investment banks in 2019 saw a year-on-year decline in equity revenues, with a handful of exceptions.

What Happens to the Investment Banking Sector When the COVID-19 Spread Stops?

If the virus outbreak does not come to a halt soon, the impact on the global financial markets will be no less than a catastrophe. Banking professionals, in large numbers, will lose their jobs.Till the time the epidemic stays, the revenues of companies will continue their decline.

How Investment Banking Strategists Rate the Impact of the Pandemic?

However, no clarity prevails at this point in time regarding the longevity of the pandemic, the strategists are expecting its containment sooner, and hoping for a quick revival of the economy.

The CEO of a leading US investment firm Opimas, namely Octavio Marenzi, while interviewing with S&P Global Market Intelligence, said – “As the death rate lowers down, the things will quickly fall back to normal”. He further added – “The pandemic will need to continue affecting human lives until the end of the second quarter of 2020 to actually put the brakes on the global economic growth”.