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The Bay Street sign is shown in the heart of Toronto's financial district in 2008. Fee income is down for Canadian investment banks in the first half of 2013, while the global market experiences a surge.

MARK BLINCH/REUTERS

For a few years running, Canada punched above its weight in the investment banking fee rankings. No more.

Mining and energy were the drivers, pushing the fee income from doing deals in Canada higher. However, six months into 2013 and Canada is going the wrong way.

Thomson Reuters figures show that fees from activities such as merger advice, lending, bond underwriting and stock sales in Canada are down 15 per cent from 2012's first six months. That's as global fees have climbed 8 per cent in the same period. Fees in the U.S. are up 16 per cent.

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In all, the year is playing out about as expected. (Here's an analysis from February that suggested Canada might have trouble keeping up with a global improvement in the deal market.) Canada had what the world wanted for many years. But the cycle is going the other direction, with commodities out of favour. If there's a consolation it's that fees in other commodity-heavy countries, such as Australia and Brazil, are down even more.

Moreover, Canada has long been known as an equity culture. Commodity producers historically financed using largely stock sales (though that is changing). So far in 2013, the percentage of fees coming from lending and bond sales is at the highest since 2005, while merger advice and equity sales are down.

The way those figures break down signals serious pain for the smaller investment banks in Canada. The big bank-owned ones have bond desks, the ability to lend and operations in other countries.

Sure, with Canadian fees on the decline the largest Canadian investment banks have stopped their steady climb in the global fee rankings. But they aren't plummeting down either. Royal Bank of Canada's securities unit fell one spot in the global rankings to 11th with just under $1-billion (U.S.) in estimated fees. Bank of Montreal's investment banking operations were unchanged at 20th in the rankings and Bank of Nova Scotia's moved up a spot to 22nd.

(For the full report, click here.)

(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)

Return to Streetwise home page.

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