Boston Consulting Group published a big report on the investment-banking industry on Tuesday.
Buried in the appendix is the chart below, which shows operating profit by business line across Wall Street.
This data is generally pretty hard to get a hold of. It is often possible to get revenue estimates showing, for example, that the fixed-income revenue pool is shrinking. Operating profit numbers are less common.
Broadly, this paints a bleak picture. In total, operating profit at Wall Street banks is down 29% since 2012.
But you’ll also notice that some business lines, like debt capital markets and rates, generate a huge operating profit. Others, like cash equities and commodities, registered a loss.
Now, that doesn’t mean that DCM and rates are the best businesses to be in, or that cash equities and commodities are the worst – though the cash-equities business is notorious on Wall Street for being a money pit.
Some business lines require more capital to be held against them because of regulations, making them unattractive from a return-on-equity perspective. Still, the chart below makes for interesting reading.
Incidentally, it reflects billions of dollars:
- Boston Consulting Group