Overcapacity and regulatory pressures in the investment banking industry will cut the number of global players from 14 down to fewer than 10 in the next 3 to 5 years, say consultants Roland Berger in a new report. Although most banks, most recently Credit Suisse and UBS, are reorganizing themselves in some way to cut costs, they have a great deal more work to do lift their eturns to above their cost of equity.

Markus Boehme, a Singapore-based partner at Roland Berger, and one of the report’s authors, says: “In order to reach a return on equity of 12 to 15 percent under Basel 3, investment banks will have to carry out much more restructuring. They will have to cut costs by about 15 percent [6 billion, or $7.8 billion], cut risk-weighted assets by 1 trillion or 20 percent and increase their pricing by about 10 percent — the last two would likely not happen without further exits and consolidation.”

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