Boutique Investment Banks Continue to Grab Share

Posted by: Spencer Ante on July 24

Earnings season in the summer of 2009 had made it clear that Goldman Sachs and JP Morgan are emerging as the two giants of the banking world.

But there is another trend in banking that’s gaining steam: Boutique investment banks are continuing to snatch market share in the aftermath of the Wall Street implosion that destroyed giants such as Lehman Brothers, Merrill Lynch and Bear Stearns.

According to the latest figures from Deallogic, Lazard and Evercore Partners seem to be emerging as big winners on the new Wall Street. In the first half of 2009, Lazard ranked as the 7th biggest bank in the global mergers and acquisitions deal market, up from the 11th spot in 2008. In addition, Evercore took the 11th spot, up from the 15th spot last year.

In the U.S. mergers and acquisitions market, boutique banks are doing even better. Evercore snagged the 7th spot, up from 13th spot last year. Lazard ranked 9th, up from 11th. And Perella Weinberg Partners ranked at number 12, while it didn’t even make the rankings last year. Other smaller players that turned up in the top 20 chart of mergers and acquisitions revenue are valuation experts Houlihan Lokey Howard & Zukin (#11), Greenhill (#14), Keefe Bruyette & Woods (#15) and Jefferies & Company (#17).

The rising stocks of these banks reflect their growing strength. After bottoming out in November at $7 a share, Evercore is now trading near $20. And after trading at $21 in early March, Lazard share are now trading at $33.

Given the continuing problems of many big banks such as Citi, Bank of America, Deutsche Bank and Credit Suisse, I would expect this trend to continue. A lot of top talent of the big banks have left to join boutiques, largely because of the compensation restrictions put on banks that have received TARP money.