Bankers said a deal would give the combined operation the balance sheet strength to underwrite the big corporate deals and weather the tough market conditions many fear are in store for the industry.
However, they cautioned that while both banks have respectable fixed- income businesses, putting the equity businesses together would still leave the group well behind the leading Wall Street houses.Neither bank would comment. As far as the global IPO business is concerned, banks are still fully staffed and anticipating a return to boom The price for such optimism may be high.. SHARES IN Bankers Trust and Deutsche Bank rose sharply yesterday on apparently well-sourced reports that the US bank had approached the Germans with a suggestion that it was open to being taken over. But the jobs shed have been mostly in emerging markets debt business, which have suffered badly because of the Russian bond debacle. But they may be deluding themselves if they believe that new entrants such as Donaldson Lufkin Jenrette and Commerzbank are going to shut up shop easily.Much has been made of the big cutbacks in staffing at City securities houses.

Some sectors such as luxury goods and airlines, not to mention investment banks, have probably missed out for this economic cycle at least.Wise as ever after the event, some bankers are hoping that a downturn will bring some normality back into a business where there have been signs of weaker houses buying their way into deals by undercutting rivals on fees.”In tougher markets,” says Mr Roscini, “quality will tell”. Firms such as Goldman Sachs and Merrill Lynch have boosted headcount in London by as much as 20 per cent over the past few years – most of their expansion predicated on the euro hastening the rush of European firms to the equity markets and requiring access to the global capital market, to which London, as ever, holds the key.Other, regional players, such as France’s Paribas or Germany’s Commerzbank, have seen the opportunity for money to be made and bought expensive bankers in an attempt to break into this exclusive club.John St John at Salomon Smith Barney says that even when the market does get back to a semblance of normal activity, it will be the less cyclical industries such as telecoms that people will want to invest in. Most of the big houses have geared up massively in anticipation of the extraordinary activity of recent years being the norm. On a $1bn deal a lead manager can usually expect at least $100m in fees.Global IPOs are a labour-intensive business. Each deal employs armies of bankers, research analysts and salespeople, not to mention the attendant lawyers, accountants, consultants and public relations agencies, particularly important for privatisations with big retail tranches, all of them expensive to run.But the investment houses also need a constant flow of large deals. Although UK equity issues are what plays to a British audience, and to the dwindling band of UK- owned independent houses, the money to be made out of the crowded and overbroked UK market is small beer compared with what the global IPO has delivered in good times.Goldman and Nikko, which jointly led the DoCoMo deal, between them pocketed $486m in fees.

That money will have to go somewhere.Dante Roscini, co-head of equity capital markets at Goldman Sachs in London, says: “In 1990 when Saddam Hussein walked into Kuwait, the market was shot for six months. When it opened it opened like a firework.”If it doesn’t, a lot of people are in trouble. Others such as Banco di Napoli and Unicredito, both Italian banks, have just been pulled.According to Goldman Sachs’ estimates some $20bn of deals have been pulled over the past few weeks – and that is just those that have been made public.Optimists, and you have to be to spend your life convincing obstinate Scottish fund managers that the 10th telecom company knocking on their door that week is as exciting as the first, believe there is so much pent up demand that when the market comes, activity will be even stronger than before UK institutions are sitting on $100bn of cash. Fortis Amev, the Belgian/Dutch insurer, did tap the markets but switched from a straight equity issue to a convertible bond. Other big deals scheduled for the autumn, such as Rupert Murdoch’s US TV arm Fox, the Air France sell-off, and a secondary offering in France Telecom have also been pulled.The worst hit are offerings from banks and insurance companies. Those deals being done, such as Greek telephone company OTE whose secondary offering has just been launched, are either very small or tend, like Swiss Telecom, to be safe and dull. They are also being done at prices 20-30 per cent below what they might have expected to get in July, something only a few sellers can stomach.Last week the $1bn float of Amadeus, the airline ticket reservation company, was pulled.