Banks Pocket Healthy Underwriting Fees As Global Equity Market Remains Upbeat

Apr 11 2014, 1:54pm CDT | by

The global equity market saw a flurry of activity over the first quarter of the year, with companies around the world raising nearly $190 billion through IPOs and follow-on offerings over the period. Quarterly data compiled by Thomson Reuters shows that equity underwriting deals were at similar levels to what was witnessed for the same period last year. While the total deal size is almost 30% lower than the $264.4 billion figure for the previous quarter, it must be remembered that the Q4 2013 results were exaggerated by a surge in equity offerings after the Fed’s initial announcements of a tapering plan resulted in a weak Q3 2013 performance.

Continued optimism among companies and investors translated into higher equity underwriting fees for investment banks. Thomson Reuters’ data estimates a 27% jump in equity underwriting fees for the industry as a whole compared to Q1 2013, although a 21% decline is expected sequentially. In this article, we detail the equity capital market performance of the country’s five largest investment banks in Q1 2014, and also estimate the change in each of their fee revenues compared to Q1 and Q4 2013.

See the full Trefis analysis for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

The table below summarizes the performance of the equity underwriting unit at each of the five largest U.S. investment banks based on data released by Thomson Reuters last week.

Goldman Sachs retained the top spot in terms of market share by deal size – a position it has maintained in six of the last seven quarters. The bank topped the list of book-runners in EMEA and Asia to achieve a commanding 10.6% share for Q4. Goldman also has a substantially larger average deal size than any of its competitors – indicating that the bank played a role in most of the largest equity underwriting deals over the quarter.

With an 8.4% market share, Morgan Stanley came in second with a total deal size which was 21% lower than Goldman, followed by JPMorgan with a 7.8% market share. In terms of number of deals, JPMorgan ranked highest among all investment banks for the quarter, with the banking group playing a role in more deals (116) than any other bank – a feat it has achieved in six of the last nine quarters.

Notably, Citigroup’s poor equity capital markets run continued for the third consecutive quarter, with the bank garnering just above 5% of the market despite ranking #1 in terms of underwriting deals in the U.S. Consequently, the bank slipped to the 8th position in global standings, with German banking giant Deutsche Bank and Swiss banks Credit Suisse and UBS putting up better numbers.

In terms of equity underwriting fees, Morgan Stanley appears to have topped Goldman by pocketing more revenues than any other investment bank. The last time Morgan Stanley reported the highest fees among all banks was in Q2 2012. As Morgan Stanley has a lower average deal size than Goldman for the period, this would mean that the former played key roles in the underwriting process for many of its deals – allowing it to make more money in the process.

Before we detail the trends in imputed fees as shown in the table above, it should be noted that imputed fees are merely an estimate based on historical data about banks’ fees for a particular role in the equity underwriting process, and the numbers the banks actually report will likely differ from these figures. But these numbers do give a good indication of what to expect. All the banks are expected to earn lower fee revenues in Q1 2014 than what they did in Q4 2013. Compared to the same quarter last year, we expect JPMorgan to earn around 24% more, followed by a healthy 18% boost for Morgan Stanley. While Goldman’s fee revenues should be less than 5% higher, Bank of America and Citigroup will most likely report fees which are 5-10% lower than what they did a year ago.

Bank Deal Size Mkt. Share # Deals Avg. Deal Size Q1’14 Fees Q4’13 Fees Q1’13 Fees
Goldman Sachs $19.9 B 10.6% 93 $214 M $362 M $573 M $351 M
Morgan Stanley $15.8 B 8.4% 97 $163 M $369 M $470 M $311 M
JPMorgan $14.8 B 7.8% 116 $128 M $341 M $434 M $275 M
Bank of America $14.3 B 7.6% 92 $155 M $240 M $418 M $267 M
Citigroup $10.0 B 5.3% 82 $122 M $240 M $313 M $251 M

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

First Italian female astronaut ready for spaceflight
Rome, Nov 24 (IANS) History will be made Monday with the first ever Italian female astronaut set to go into space for a mission on board the International Space Station (ISS).
 
 
Mummy wearing jewellery unearthed in Egypt
London, Nov 23 (IANS) Spanish archaeologists have discovered about 4,000 years old female mummy wearing rare jewellery in Egypt.
 
 
Exercise and fasting could boost brain's functions
Washington, Nov 23 (IANS) Exercise along with occasional fasting is good for boosting the brain's neurons, shows a new research.
 
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
 

Latest from the Network

Jessie J wants beau like her dad
Los Angeles, Nov 24 (IANS) A perfect man for singer Jessie J would mean someone like her father. The 'Bang Bang' hitmaker is currently dating singer Luke James. She says she loves the way her social worker father...
Read more on Celebrity Balla
 
Heavy rains in Morocco leave six dead, 10 missing
Rabat, Nov 24 (IANS/EFE) Six people were killed and 10 others reported missing in heavy rains in southern Morocco, official sources said. According to health officials, the tragedy happened in an area outside...
Read more on Politics Balla
 
Kendra Wilkinson to 'fight' for Hank Baskett
Kendra Wilkinson thinks Hank Baskett is ''worth fighting for''. The 29-year-old former Playboy star - who split from her husband after he allegedly had an affair with a transgender model in June this year - has revealed...
Read more on Celebrity Balla
 
British-Iranian woman jailed for attending men's sports event gets bail
Tehran, Nov 24 (IANS) The British-Iranian woman, who was jailed after attempting to watch a men's volleyball match in Tehran has been released on bail, media reported Sunday. The family of the 25 year-old Ghoncheh...
Read more on Politics Balla
 
At least two people killed in Philippines blast
Manila, Nov 24 (IANS) A bomb blast in the south Philippine province of North Cotabato Sunday killed at least two people, a military official said. According to the official, Jo-ann Petinglay, the bomb was an...
Read more on Politics Balla
 
'Fifty Shades of Grey' brings film offers for Rita Ora
Los Angeles, Nov 24 (IANS) Singer Rita Ora, who has a cameo in long-awaited movie "Fifty Shades of Grey", says it has subsequently brought in more opportunities for her in the film world. The 23-year-old singer is...
Read more on Celebrity Balla
 
First Italian female astronaut ready for spaceflight
Rome, Nov 24 (IANS) History will be made Monday with the first ever Italian female astronaut set to go into space for a mission on board the International Space Station (ISS). Samantha Cristoforetti, a captain in the...
Read more on Business Balla
 
Jennifer Aniston disses Kim Kardashian West's nude photoshoot
Jennifer Aniston has joked that she was one of the ''original'' women who posed nude for a magazine. The 'Horrible Bosses' star - who exposed her bottom on the cover of Rolling Stone magazine in 1996 - compared herself...
Read more on Celebrity Balla
 
Kris Jenner defends Corey Gamble over stalking allegations
Kris Jenner has defended her boyfriend over stalking allegations. The 59-year-old 'Keeping Up With The Kardashians' star - who is currently dating 33-year-old Corey Gamble, following her separation from Bruce Jenner -...
Read more on Celebrity Balla
 
Selena Gomez 'emotional' ahead of American Music Awards
Selena Gomez is ''emotional'' ahead of her performance at the American Music Awards tonight (11.23.14). The 'Come And Get It' hitmaker posted a black and white Instagram video of her at the rehearsals for the AMA's,...
Read more on Celebrity Balla