Moody's, the ratings agency, has added to the gloom in investment banking by predicting that European capital markets may not recover until 2004 - and has picked out the likely winners and losers in the eventual turnaround.

Capital market volumes have fallen across the board this year, prompting a shake-out in the investment banking sector. Moody's analysts Peter Nerby and Alexandra Sleator expect "marginal" players to be driven out of the European market to the benefit of the industry's stronger players, which can "clean up excess capacity".