U.S. investment banks remain the dominant force in global capital markets, and recent progress by certain European lenders has not closed the performance gap. Over the past decade, leading U.S. firms have delivered returns on equity of roughly 10%, versus about 7% for large European counterparts. That spread reflects stronger investment-banking and trading revenue in the United States, underpinned by deeper domestic capital markets, scale advantages and substantial, sustained technology investment.
Institutions such as JPMorgan Chase, Goldman Sachs and Morgan Stanley have entrenched positions across advisory services, equity and debt capital markets, and sales-and-trading operations. Dealogic data shows U.S. banks occupying the top five global investment-banking revenue slots for much of the past decade, a pattern that illustrates how difficult it has been for non-U.S. firms to compete at the same scale.
European banks began the last decade from a comparatively weaker starting point. Many spent years restructuring, de-risking and stepping back from capital-intensive or volatile businesses in the aftermath of the global financial crisis and the euro zone debt turmoil. Actions taken during that period included exits from certain trading businesses - for example, one major lender left global equities trading in 2019 - while others announced more recent wind-downs of parts of their mergers-and-acquisitions and equity capital markets operations in key regions.
That period of retrenchment created space for U.S. institutions to expand market share, particularly in global investment banking and equities trading. U.S. banks now account for more than three-quarters of global equities and fixed-income trading revenues, supported by heavy technology investment that has materially lowered costs per trade even as trading volumes have risen.
Still, European lenders have made measurable progress in selected areas. Since 2019, capital-markets revenues at European banks have grown at rates comparable to those of U.S. peers, albeit from a substantially smaller base. Stronger capital positions, improved profitability and a "higher for longer" interest-rate environment have permitted more targeted investment, particularly to bolster regional investment-banking franchises across Europe, the Middle East and Africa and in parts of Asia.
Despite these gains, large-scale consolidation across Europe is unlikely to be a straightforward solution. The European Central Bank has encouraged bank mergers, but national barriers and limited cross-border synergies constrain the creation of a single pan-European champion with the scale necessary to rival U.S. giants in global capital markets.
The net effect is selective narrowing rather than broad convergence. European banks may fortify their domestic and regional positions, but the structural advantages enjoyed by U.S. firms - depth of domestic markets, scale and persistent technology investment - suggest U.S. leadership in global capital markets is likely to remain intact into 2026 and beyond.
Context and implications
- Returns on equity have diverged over the past decade - roughly 10% in the U.S. versus about 7% in Europe - reflecting differential revenue generation in investment banking and trading.
- Technology-driven cost efficiencies and deep domestic markets have amplified U.S. banks' capacity to scale trading operations, contributing to their outsized share of global equities and fixed-income trading revenues.
- European capital-markets revenues have grown since 2019, yet expansion has been from a smaller base and focused on regional strengths rather than global scale.