The second McKinsey Global CIB 50, our annual ranking of the largest institutions in the world (by reported revenues), confirms that 2006 was a stunning year for all the leading corporate and investment banks. In a sector where Darwinian principles guide decision making, the results provide valuable information about the state of the industry beyond narrow business lines.

An analysis of the rankings reveals that the top 10 institutions have been growing at a faster pace than the rest of the pack. While the year-on-year revenue growth for the top 50 as a whole was an impressive 19 percent, up from 14 percent the previous year, the top tier enjoyed an average jump of 24 percent (Exhibit 1). Increases were fairly consistent across each of the middle three tiers, but the fifth tier (those ranked 41–50) lagged behind the others, with an average rise in revenues of 15 percent.

Upon closer examination, the research spotlights the driving force behind the largest players' outperformance—the record-breaking results stemming from capital markets activities.

Exhibit 2 isolates revenues by advisory, underwriting, and sales and trading for the top players in these markets. Average year-on-year growth for this group was an astonishing 29 percent, fueled by booming product categories such as commodities, prime brokerage, and securitization. This ranking also shows a strong correlation between accelerated growth rates and companies reputed to be making significant principal investments.

This said, strong individual performances are not confined to the top 10 or to the capital markets powerhouses. Over one-quarter of the institutions in the top 50 experienced year-on-year revenue growth in excess of 25 percent, and this group is distributed quite evenly across the list.

The McKinsey Global CIB 50

Some organizational changes have had significant impact on corporate and investment banking results; 2005 rankings shown here are based on restated results to provide a more accurate representation of performance.

Methodology

While we aim to provide an apples-to-apples comparison of institutions, we are somewhat limited by the nuances of the players' reporting structures, which are in a continual state of flux. In fact, when comparing individual results from 2005 with those from 2006, we witnessed some organizational changes that had a significant impact on CIB results; therefore, we have chosen to provide 2005 rankings that reflect restated results to show a more accurate representation of actual and relative performance.

Our definition of corporate and investment banking includes revenues generated through advisory activities, fixed income and equities underwriting, sales and trading, syndicated lending, and securities and transactions services. We sought to include only those revenues earned by serving large corporate and institutional clients; when middle-market revenues were allocated to a separate division, we excluded them from the results. Many institutions, however, group revenues from small and midsize enterprises in their corporate and investment banking division, and in these instances revenues will be overstated.

We used profits before taxes as a proxy for measuring profitability and have footnoted all exceptions to the guidelines stated here.