IB Industry well positioned for undiscounted growth

The Investment Banking (IB) industry, in our view, is in a much better shape today compared to where it has ever been and the key factors behind this are: i) transformation to a more sustainable, lower capital intensive business, i.e. lower risk; ii) focus on captive sustainable revenue streams; iii) higher barriers of entry not just for Tier II/III players leading to consolidation in market shares for Tier I IBs but also a head start to fight off the threat of Fintech new entrants (unlike retail banks); and iv) increasing share of “captive” business. We believe our long-term base case revenue assumptions are conservative at about 5% p.a. as we do not take into account market share gains by Tier I IBs, nor structural growth elements as capital markets open up further, let alone the ‘Tencent-type’ revenue opportunities, as discussed in this report.