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As their parents struggle through yet another difficult year, finews.asia asks what’s next for European banks in Asia.

If there is one thing the big banks of Europe have learned from their quarterly results posted last week – and stakeholder reaction to them – it is that they don’t know it all. And they can’t do it all. Data compiled by research firm Dealogic confirmed American banks raked in 52 percent of global investment banking revenue in 2018, leaving a meager 26 percent to be split between their European peers, big and small alike.

The esteemed houses of Rothschild and Lazard scrapped with UBS and BNP Paribas for their share of the takings. Nothing indicates the pool will be any larger in 2019, though individual institutions may eke out larger or smaller shares in this zero-sum game. China, which has been dominating Asia-Pacific deals since 2013, posted two consecutive years of decreased investment banking activity.

First Amongst Equals

The U.S is, without doubt, home to the largest pool of investment banking revenues in the world. Theoretically, this is up for grabs amongst the large investment banks, whose number includes the two largest Swiss banks, UBS and Credit Suisse, as well French major BNP and the U.K’s last standing global bank Barclays.

Realistically, the Europeans will find it increasingly difficult to remain in the game, much less increase market share. These banks lack the scale on which a successful investment banking is predicated. The majority of them are in cost-cutting mode and cannot make the investment required to remain competitive. Weak home markets are compounding these woes.

Here's the Kicker

In comparison, U.S. behemoths such as J.P. Morgan and Goldman Sachs benefit from a large, captive home market with relatively lax regulation, the ability to optimize taxes for themselves and clients through onshore trust structures and significant advantages as incumbent industry leaders.

Not surprisingly, the return on equity for U.S. banks is, on average, 12 percent while it is at 6.5 percent for their European peers. But here’s the kicker – Asian banks provide the highest returns for banking equity at 13 percent. China and Indonesia led returns in the region every year from 2008 to 2015.

Forbidden Fruit