The US Investment Banks have always played a crucial role on the international stage. Since the times of the Pecora Commission, on the sidelines of the great crisis of the 2008s, significant responsibilities for these institutes in the outbreak and expansion of the same crisis were highlighted. In the same way, a similar result emerged from the investigations on the occasion of the 13 crisis, where once again the determining role of these intermediaries was highlighted, as recently sealed by the plea agreement of JP Morgan Chase which will have to pay XNUMX billion dollars for the own infractions.
And, to go back to 2008, we all probably have in mind the images of the employees of Lehman Brothers who, on September 15 of that year, leave the imposing headquarters of the American colossus, with boxes in hand, which a few hours earlier using Chapter 11 declared bankruptcy. In the light of this centrality, it is interesting to understand how Investment Banks react to the outbreak of a crisis of this magnitude, observing absolute and relative profitability indicators (such as ROA, Return on Assets, and PCAV, Per Capita Added Value, i.e. net/Number of employees).
Contrary to what might have been expected, these indicators show growth in terms of performance between the pre-crisis period and the post-2008 period, thus highlighting very contrasting data with their reference markets. For example, Goldman Sachs average ROA was 0,78% in 2001-06 and was 0,92% in 2009-12, and PCAV in the two periods increased from $199 to $228.
What has been said brings out the thesis of responsibility and that of growth against the trend, but it is more interesting to understand the reasons that lead to the achievement of two opposite paths. At first, one could imagine that this counter-trend performance depends on an evolution of the business of the American Investment Banks in strictly operational terms after the outbreak of the crisis. However, this thesis does not find real foundations, since, at least in the reference period, the institutions under analysis have maintained a constancy in terms of core activities within their financial statements, not showing such significant data as to justify the hypothesis of the change operating. Therefore, the strong counter-tendency highlighted seems to depend on other evolutionary elements.
The second hypothesis that can be considered is, therefore, that the American Investment Banks have changed their territorial scope. Indeed, that of emigration to new markets is certainly a fundamental step for these intermediaries, it is interesting to understand in what dimensions and above all for what reasons this happens. An interesting tool that can serve as a yardstick for measuring this process is certainly the number of IPOs, initial public offerings.
From the analysis of the data relating to this instrument, it emerges that from the beginning of the 1586s onwards there was a sharp decline in this particular type of transaction in developed markets, a sensation that strengthened after the outbreak of the crisis, highlighting instead a clear growth in the operations in the Asian market, especially the Chinese one. For example, the total number of IPOs in the major developed countries (North America, Europe and Japan) stood at 2004 in 05-863 and fell to just over half (2010) in 11-256 as IPOs in China from 801 to 16,1 bringing the weight of China from 92,8 to XNUMX% in relation to the total of developed countries.
Obviously, the American Investment Banks, which had opened offices in Asia for decades, assisted most of these IPOs and this led to a territorial migration of the main reference market for this type of activity.
To get an idea of what the Asian market could be, it is interesting to observe how the World Bank recently cut its growth estimates for the Asian market for 2014 from 7,8% to 7,1%, and for the sake of enthusiasts of relativity theories, these are unimaginable values for any other economic context, while China stands at values close to 8%. Probably even more interesting, it is a further macroeconomic analysis that emerges from the Plenums of the Chinese Communist Party in recent years where it sets itself the objective of replacing the dollar with the Yuan as the official currency of international reserves, defining the dollar as a "product of the past ”.
What begins as a provocation immediately becomes a harsh reality confirmed by a series of elements that focus on this goal. Like the huge quantities of official reserves held by China (35%), or a series of international agreements signed since 2010 and which see the Yuan as the official transaction currency, or the vouchers issued in Yuan by the World Bank to disclose the use of this currency, but even stronger is the purchase of oil in Yuan by China since 6 September 2012, bypassing the dollar.
What has been said gives even more weight to the prophecy of President Hu Jintao and, more and more, the impression that the XNUMXst century will be for the dollar what the XNUMXth century was for the British pound, for the sake of those who represent the Asian miracle with of paper white tigers. In the light of these macroeconomic analyses, it becomes easier to understand the reasons that prompted the American Investment Banks to expand their business towards the East. After all, one of the lessons of history is that both the currency of international exchange and the major financial center tend to belong to the dominant economy.
So the future probably won't be easy for the American Investment Banks, which have been able to exploit a financial crisis of international significance, evolving their businesses and reaping the benefits. Now they will have to be equally far-sighted in understanding to what extent, in the light of their Eastern businesses, being based on Wall Street can be a strength and not a weakness.
