LONDON, Feb 29 (Reuters) - Revenue at the world's 10 biggest investment banks fell 17 percent last year, extending a steady decline since 2009 as shrivelling bond trading income hit firms hard, an industry study showed.
Sovereign debt turmoil in the euro zone shook trading in stocks and bonds and dealmaking in the second half of last year, pushing aggregate revenues down to $144 billion, $80 billion below a five-year revenue high hit in 2009, according to analytics group Coalition.
Its index tracks Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan , Morgan Stanley, Royal Bank of Scotland and UBS.
Fixed income -- the division that usually includes the trading of government and company bonds as well as commodities -- was the worst performer, with revenues there tumbling 25 percent across the ten investment banks.
But the business, once a huge profit driver and which helped banks' revival after the 2008 financial crisis, still makes up the bulk of banks' income. Fixed income revenues were 52 percent of the total, the Coalition report showed.
Other divisions, such as merger and acquisition advisory, contributed more revenue-wise than in previous years, although fees from equity listings and bond issuance also dwindled, meaning deal origination and advisory revenue fell 8 percent.
The importance of fixed income as a money-spinner could yet wane further. Market turmoil hurt income last year, but the business also consumes huge amounts of capital, an issue which will likely squeeze revenues more when stricter capital rules kick in.
Banks are already cutting back on the bonds they hold for trading, against which they have to hold capital.
Within fixed income, credit, or the trading of financial and corporate bonds, was the weakest area, Coalition found. Performance in commodities improved in 2011, however.
Revenues in equities trading fell 5 percent on 2010, which Coalition said was down not just to market uncertainty but also to advances in the use of electronic trading platforms, which squeezed margins.
The analysis group said its research showed headcount levels at investment banks would continue to fall in 2010, as productivity by revenue-producers declined in all areas.
This follows a deep round of layoffs in 2011, when more than 130,000 job cut plans were announced, according to a Reuters tally.