Investment banking faces a shakeout and only large commercial players and boutiques offering outstanding service will survive and prosper, the head of emerging markets banking specialist Renaissance Group said.

Investment banks are undergoing wrenching change as weak financial markets force companies to pull back on raising capital and striking deals, cutting the flow of fee income that had formed the lifeblood of the business.

'The industry will end up with a barbell of a small number of these enormous, essentially commercial banks, which have investment banking operations,' said Stephen Jennings, chief executive of Russian group Renaissance.

'On the other end, you will have much smaller, more entrepreneurial, primarily private businesses, and the accent will be on relationships, reliability, high levels of service, entrepreneurialism, which harks back to an earlier era.

'The killing zone will be in the middle.'

Global mergers and acquisitions activity, a driver of investment banking fees, fell 25 per cent worldwide in the first half of 2012, according to Thomson Reuters data.

Global equity fundraising, including IPOs and secondary offerings fell 25.8 per cent in the period.

'The last thing you want to be right now is a pure-play investment bank,' said Jennings, who co-founded Renaissance in 1995 and now presides over a business that stretches from Moscow through sub-Saharan Africa and Asia.

The New Zealander has diversified Renaissance so that only 20pc of its value is in the investment bank - other parts include consumer finance, asset management, real estate and wealth advice. The bank is doing better financially than a year ago, he said.-Reuters