By Tommy Reggiori Wilkes, Mathieu Rosemain, Lawrence White and Elizabeth Howcroft
LONDON/PARIS, May 5 (Reuters) - Europe's investment banks are struggling to maintain market share as Wall Street titans power ahead, fuelled by regulatory changes and vast pools of capital they can deploy to compete.
First-quarter earnings from BNP Paribas, Deutsche Bank and other European majors last week painted a mixed picture for their trading and advisory arms, with several reporting falls in revenue or only tiny
rises.
By contrast, U.S.-based giants including JPMorgan and Morgan Stanley posted record sales as their traders seized on market volatility wrought by the Iran war.
While quarterly numbers can be volatile, and while Swiss bank UBS outperformed its European peers with a record three months for its traders, the otherwise weak results underline how investment banking competition remains fierce in a playing field that is tilting further in Wall Street's favour.
U.S. investment banks have gradually stolen market share from their European counterparts since the 2008-2009 financial crisis, aided initially by a faster clean-up of their balance sheets and ever since by deeper and more profitable domestic capital markets that can subsidise their businesses elsewhere.
The Trump administration has moved to cut regulation for U.S.-based banks. Proposed changes to the so-called "Basel III" and "GSIB surcharge" rules could reduce capital levels at Wall Street banks by around 4.8%. The decision was a victory for the U.S. banking industry, which fought hard to water down an original plan that had envisaged 20% hikes.
"The further apart it goes, the greater the competitive friction we're going to have to overcome," Barclays CEO C.S. Venkatakrishnan told reporters last week, referring to the gap between Europe and the more deregulated U.S. "We've done a good job overcoming it, and we'll continue to overcome it, but it is a competitive edge that the U.S. banks get as these disparities grow," he said.
European investment banks such as Societe Generale and Barclays have also retreated from key markets.
In addition, Europeans are losing business in areas other than stock and bond trading. Their share of global investment banking fees - for areas like M&A and capital raising - fell to 21% last year from 29% in 2015, while U.S. banks have increased their share of the haul to 51% from 46%, according to LSEG data.
The European share shrank further to 20% in the first quarter of this year, the lowest of any annual percentage since LSEG records began in 2000. The U.S. share hit 54%, the data showed.
Banks globally have also lost business to market-making firms such as Citadel Securities and XTX in equities and foreign exchange trading.
"DISAPPOINTING ACROSS THE BOARD"
BNP Paribas reported a 0.8% drop in overall investment banking revenue, while at SocGen's investment banking division - its largest - revenue declined by 4.5%, dragged down by an 18% slump in fixed-income trading.
SocGen CEO Slawomir Krupa blamed that result on weaker client activity and volatile short-term rates, adding that a lack of diversification left it more exposed than its U.S. peers. Citi analysts described SocGen's investment banking performance as "disappointing across the board".
At Deutsche Bank's investment bank, which operates from Sydney to New York, revenue was flat. Bank executives said capital market issuance activity took a hit in March but was recovering in April. Rates trading also was relatively weak.
European investment banks' market share in capital markets shrivelled to an estimated 32% in 2025, from 41% in 2012, Oliver Wyman said last year.
Their share of revenue from market trading, by contrast, has held relatively steady in recent years at 31% of the total brought in by U.S. and European investment banks combined, according to data for 2021 to 2025 from Coalition Greenwich.
To be sure, analysts expect European investment banking revenue to grow this year, driven by a favourable backdrop of volatile markets and dealmaking, even as lenders lose market share to U.S. players. Deutsche upgraded its outlook for investment bank revenue for 2026, expecting it to be higher rather than just slightly higher.
UBS stood out after investment bank revenue jumped 27% year-on-year, boosted by its trading arm. Chief Financial Officer Todd Tuckner cited the bank's "capital-light approach".
Rival European banks are often more active in fixed income and balance sheet-heavy financing, where U.S. peers and their newly freed up capital can outcompete.
(Reporting by Mathieu Rosemain, Elizabeth Howcroft, Tommy Reggiori Wilkes and Lawrence White; Additional reporting by Lawrence White in London, Tom Sims in Frankfurt and Ariane Luthi in Zurich; Graphic by Lawrence White; Editing by Edmund Klamann)
