Big Investment Banking Opportunities in Emerging Markets: McKinsey

While U.S. financial markets remain gloomy, opportunities for investment bankers remain strong in emerging markets.

That's the conclusion of a recent McKinsey Quarterly study that paints a cheerful picture of most of the world's banking possibilities. Even in the worst case scenario, the study says, "emerging Asia and Europe, the Middle East, and Latin America will probably show absolute revenue growth over the next three years."

Several factors are coming into play, according to McKinsey consultants Markus Bohme, Daniele Chiarella and Matthieu Lemerle. Much of the "emerging" world has avoided U.S.-style downturns as they create their own trading patterns that might not have much to do with the U.S. or Western Europe.

Also, countries such as China, India and the United Arab Emirates are maturing so quickly that it might be a misnomer to call them "emerging" any longer. They demand the same level of sophisticated investment banking services that western multi-national companies require and represent lucrative fee possibilities, the McKinsey people say.

About two thirds of the revenue growth is likely to come from Asia representing $120 billion of investment banking work. Obviously China is the place to watch, as is India, but McKinsey expects Japan to be in need of servicing as it continues its lengthy climb out of deflation. Sovereign wealth funds and hedge funds are being created quickly in Asia.

Latin America is likely to grow 16 percent per year in revenue pools in McKinsey's "benign" scenario and by 4 percent in its most pessimistic one. Brazil dominates, followed by Mexico and Chile.
Emerging Europe is another place to look and it's not all about Russia. Poland and other places in Central and Eastern Europe offer rich opportunities.

Despite their relatively small capital size, the Middle East is drawing more investment bankers from New York and London. Hot spots are Bahrain, Oman, Qatar, Saudi Arabia and the UAE. By 2020, the Gulf Cooperation Council encompassing these oil-rich states will have invested a staggering $3 trillion, McKinsey says.

These "emerging" or "emerged" markets have a chance to catch up with the rest of the world that seems bogged down with real estate and other financial woes.