Pedestrians walk past the entrance to Societe Generales offices in London. The French investment bank wants to grow its credit and debt capital markets across Asia Pacific.

Dow Jones/Hong |Kong

Investment banks in Asia are stuck in a rut, as revenues for advising companies on everything from share sales to asset purchases have gradually sunk to their lowest level since the global financial crisis.

After a promising start to the year, investment banks in Asia ended up suffering their worst first quarter by revenue since 2009, which in turn followed a steady decline over the past three years. Across Asia Pacific, including Japan, investment-banking revenues fell to $12.4bn last year, the lowest since 2009.

The first-quarter decline came even as bankers in Asia expected a big year for deals, thanks to recovering global growth and signs that China’s economy, the world’s second-biggest, will avoid a hard landing.

Global investment banks bulked up their operations in Asia in the wake of the global financial crisis, hiring staff and offering a wider suite of services in an attempt to cash in on fast growth in the region. But returns have disappointed as market activity has fluctuated and costs have risen. Many banks have since cut back.

This year, revenues from underwriting share sales grew strongly in the first quarter, but Hong Kong, one of the region’s biggest financial centres, is nursing its wounds after losing major initial public offerings. These include the over $15bn Alibaba Group Holding deal which is now headed for the US and Hong Kong tycoon Li Ka-shing’s Hutchison Whampoa scrapped plans to list unit Watson’s locally after selling a $5.7bn stake to Singapore’s Temasek Holdings.

Selling shares is typically the biggest single-money earner for investment banks, making up almost half of revenues as earnings from bond sales and mergers and acquisitions tumble.

Investment bank revenues in Asia and the Pacific region dipped to $3.1bn in the first three months of the year from $3.2bn for the same period last year, according to data provider Dealogic. That’s the lowest first-quarter revenues since 2009, at the depths of the global financial crisis, when fees totalled $1.6bn, according to Dealogic.  Earnings from bond sales, loans, mergers and acquisitions fell sharply. Revenues for underwriting syndicated loans –or corporate loans sold by a group of banks – slumped by 20% on year to $430mn, debt capital markets fell 30% and M&A was down by 20%.

The fall in bond earnings comes even as the region saw a flurry of borrowing from countries early in the year, including the Philippines and Indonesia, with the latter’s $4bn sale the biggest-ever sovereign dollar bond in Asia outside Japan.

Governments and companies have been looking to lock in cheaper borrowing costs while interest rates remain low and before central banks, including the US Federal Reserve, gradually tightens policy and drives up the cost of lending.

Earnings declines in those areas were largely offset by gains from arranging and underwriting share sales, which was the biggest earner for banks and made up almost half of total revenues in the quarter. Equity capital markets revenues rose 68% compared with a year earlier to $1.4bn.

“(Equity capital markets) is clearly on an upward trend this year, while M&A is due for a rebound in the region,” said Nick Gardiner, a Hong Kong-based partner at Boston Consulting Group. “(Debt capital markets) is the area where I wouldn’t have expectations for much of a boost.”

China alone accounted for 37% of investment bank revenues in Asia and was among a handful of countries that recorded growth on year, helped by a string of deals in the technology sector. The country’s cash-rich Internet companies including Alibaba and Tencent Group Holdings  spent more than $2bn on acquisitions and investments in March alone.  And Chinese personal-computer maker Lenovo Group  has said it is still looking to make acquisitions, after earlier this year announcing a pair of deals valued at $5bn.  Hong Kong, Australia, New Zealand and Sri Lanka were the only other nations where investment bank earnings increased over the year. Revenues in Sri Lanka leaped 285% on year because of a $1bn bond issued by the government in January.

Another problem is that bumper deals are increasingly being handled by more banks, giving each one a smaller slice of the pie. An expected $6bn Hong Kong initial public offering by WH Group will have 28 underwriters, surpassing the record held by Chinese brokerage China Galaxy Securities Co which hired 21 banks to arrange its $1.1bn offering in May 2013.

Still, even as fees remain subdued some banks are planning modest growth. French Societe Generale wants to grow its credit and debt capital markets across Asia Pacific and will also expand its energy and natural-resources finance business in Southeast Asia. US investment bank Jefferies Group is also considering expansion in Southeast Asia.