When is the right time to expand IB coverage to a new sector? Banks tend to follow growth – adding coverage to rapidly growing segments of the fee pool. However, this may not be the most effective approach for a bank that needs to win new clients, and unseat incumbent relationships.
Today’s FCS Intelligence report considers the share of follow-on ECM fees paid to non-IPO bankers. If this share is high, incumbent banks are being replaced by new banks at a high rate – and ideal scenario for a would-be market entrant. Our analysis of the Pharmaceutical and Energy sectors shows that the period of greatest IB relationship volatility occurs at the very bottom of a market downturn. Rather than chase growth, banks might be better served by expanding counter-cyclically into beaten-down sectors.