First-half investment bank fees at highest since 2007

Posted by Anton Murray Consulting on 3 Jul, 2014

Clare Hutchison

Fees paid for investment banking services rose 12 percent in the first half of 2014, their strongest start in seven years, data showed on Wednesday, as surging stock markets encouraged firms to strike deals.

Global investment banking fees totalled $47.1 billion (27.44 billion pounds) in the first six months of the year, compared to $42.2 billion last year, according to data from Thomson Reuters and Freeman Consulting. That was the highest level since 2007, when investment banks earned $56.8 billion.

Fees in Europe showed the most improvement, rising 29 percent so far this year, while in Asia Pacific fees were 10 percent higher. They were up 6 percent in the Americas and down 15 percent in Africa and the Middle East.

Record highs in stock markets and continued low volatility have prompted an increasing number of firms to hire investment banks to help them issue equity. Private equity firms have also sought their services as they seize the opportunity to sell out of investments made before the financial crisis.

Cash-rich corporations with strong balance sheets, like Comcast Corp (CMCSA.O) and General Electric Co (GE.N), have led a revival in mergers and acquisitions, further adding to bankers’ workloads and fee pools.

Fees earned for advising on equity capital market (ECM) transactions, such as initial public offerings (IPOs), were 36 percent higher at $13 billion, reflecting a 16 percent increase in activity over the period. M&A fees rose 6 percent to $10.1 billion as deal volumes surged to $1.75 trillion, up 75 percent. Fees from syndicated loans were up 10 percent.

JPMorgan (JPM.N) was the highest paid bank, bringing in $3.4 billion in the six-month period and accounting for 7.3 percent of wallet share. In a repeat of the previous year’s rankings, fellow U.S. institutions Bank of America Merrill Lynch (BAC.N) and Goldman Sachs (GS.N) followed in second and third respectively.

Freeman Consulting Director Lam Nguyen said the second half looks positive for fees, as a number of deals are scheduled to close towards to the end of the year. Another buoyant period for IPOs is also expected, he added.

If fees continue to be earned at the same pace in the second half as they did in the first, total fees should reach $95.4 billion, according to the data.

“Overall 2014 should be a very good year,” Nguyen said.

Debt capital markets (DCM) have proved the only weak spot so far this year. Banks were paid $12.6 billion for DCM underwriting, down 0.6 percent from 2013.

Nguyen said the slight drop compares to an exceptional level of activity last year and issuance remains strong.


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