INVESTMENT BANKING AND CAPITAL MARKETS
Market Report – Second Quarter 2004 Edition
New York, Frankfurt September 1, 2004
THE BOSTON CONSULTING GROUP
TABLE OF CONTENTS
-4-
BOND TRADING REMAINED STRONG WHILE EQUITIES BUSINESSES SLOWED IN SECOND QUARTER 2004
$B 150
Corporate Bond Origination
100
50
0 1Q/01 3Q/01 1Q/02 3Q/02 1Q/03 3Q/03 1Q/04
Low market volatility hit earnings from equity trading hard • Equity trading revenues were 19.7% lower than levels three months ago
Corporate finance and advisory (CF&A) revenues improved across businesses, but the increase was not strong enough to compensate for lower trading revenues, which declined by 16.1% from the first quarter
The Industry Faces a Tough Second Half Unless Equity Trading Bounces Back
BCG investment banking performance index declined by 29 points to 99 in the second quarter 2004
Q2 2004 Market Report-BR-TM-NYC-1Sep04.ppt
Page 2 9
17 24 29 35
-1-
Overview of Second Quarter 2004
Q2 2004 Market Report-BR-TM-NYC-1Sep04.ppt
-2-
INVESTMENT BANKING PROFITS DECLINED SHARPLY
Chapter Overview of Second Quarter 2004 Revenue Opportunities from Hedge Funds Market Review
• Corporate Finance and Advisory • Fixed-Income Trading • Equity Trading Data Definitions and Abbreviations
Note: The BCG IB performance index is calculated based on aggregate profits of rce: Company reports, BCG analysis
Q2 2004 Market Report-BR-TM-NYC-1Sep04.ppt
$B 600
M&A Advisory(1)
400
200
0 1Q/01 3Q/01 1Q/02 3Q/02 1Q/03 3Q/03 1Q/04
$B 1200
U.S. Bond Trading(2)
1000
800
600
400
200
0 1Q/01 3Q/01 1Q/02 3Q/02 1Q/03 3Q/03 1Q/04
• CF&A revenues improved by 12.3% on average
Source: Company reports, BCG analysis
Q2 2004 Market Report-BR-TM-NYC-1Sep04.ppt
-3-
BCG PERFORMANCE INDEX DECLINED SHARPLY IN SECOND QUARTER 2004, BUT WAS STILL HIGHER THAN LAST YEAR’S LEVELS
Index 140
BCG Investment Banking Performance Index
127.6
120
98.9
100.0 100
96.2
90.5
91.0 87.4
80.1 80
71.2
76.7
60.2
51.8
60
44.7 48.2
40
20
2001
2002
2003
0 1Q/01 2Q/01 3Q/01 4Q/01 1Q/02 2Q/02 3Q/02 4Q/02 1Q/03 2Q/03 3Q/03 4Q/03 1Q/04 2Q/04
• However, second quarter results were still better than those of one year ago • In addition, results from the first half of 2004 were strong
While revenues from fixed income decreased significantly, most of the decline was seasonal • Revenues from fixed-income trading declined by 13.9% from previous quarter
$Tr 10
Equity Trading
8
6
4
Asia U.S. Europe
2
0 1Q/01 3Q/01 1Q/02 3Q/02 1Q/03 3Q/03 1Q/04
(1) Based on effective transactions
(2) Daily average trading volumes for treasuries, agencies, asset-/mortgage-backed securities (ABS/MBS), and corporate bonds