A dearth of large IPOs in Hong Kong and mainland China last year also meant global brokerages had fewer deals to work.

In Russia, Western banks are pulling back as VTB and OAO Sberbank expand. Sberbank, once the Soviet Union’s state-owned savings bank, last year bought Troika, the country’s oldest brokerage, for at least $1 billion to compete with VTB Capital and foreign firms in bond underwriting and stock trading.

“The global investment banks are not naturally at an advantage in the fast-growing emerging economies,” said Tom Kirchmaier, a lecturer in business economics at the U.K.’s Manchester Business School. “The majority of deals are local deals where local banks have superior knowledge, better networks and long-established client relationships.”

Citigroup Withdrawal

As Citic and VTB Capital expand, Citigroup is scaling back in countries previously part of its growth strategy.

Citigroup CEO Michael Corbat, who took over in October, plans to eliminate about 11,000 employees and withdraw from some emerging markets, undoing part of the expansion initiatives of predecessor Vikram Pandit, according to a December statement. Corbat, 52, said the bank would close or divest operations in Pakistan, Paraguay, Romania, Turkey and Uruguay.

Still, European and U.S. banks said firms in emerging markets can’t compete outside their home countries because they’re too small. The global banks remain the biggest earners. HSBC, Europe’s top lender by market value, took in the most fees in the Middle East last year, and Zurich-based Credit Suisse was No. 1 in Latin America over an eight-year period through 2012, Freeman data show.

‘Greatest Value’

Credit Suisse said it was first in global capital markets and mergers in the developing economies the firm covers, with a 7.5 percent share of fees from 2005 to 2012, citing numbers from Dealogic, a London-based consulting firm.

“Our focus is on the largest, most complex, cross-border and regional transactions, where we can add the greatest value to our clients,” said Vikas Seth, head of investment banking for the Middle East, Turkey and Africa. “We generally do not pursue smaller mandates, which have characterized much of the activity in the Middle East in recent years.”