Asia IB fees rise amid China boom
Investment banking fees improved in Asia Pacific ex-Japan in the first nine months of this year, climbing 23.9% as a rebound in Greater China equity activity boosted wallets.
So far this year banks earned US$18.6bn in fees, marking the first year-on-year increase in fee income for the January to September period since 2021, according to LSEG data. Fee income for the third quarter rose 10% to US$6.2bn.
Fees from all asset classes are up this year, with equities jumping 47.9% to US$3.7bn for the first nine months and bonds climbing 15.5% to US$10.6bn. Fees from loans edged 3.4% higher to US$1.8bn and mergers and acquisitions earned banks US$2.5bn in fees, up 55.4% from a year earlier.
The top five fee earners for the first nine months were all Chinese banks.
Citic, which comprises Citic Securities and Citic CLSA, was the top earner as it raked in US$1.1bn for a 5.7% market share. The bank's fee income from equities surged 120% to US$252.1m. Citic was the top earner from IPOs, bringing in US$94.3m for the nine-month period.
Bank of China and China Securities took second and third places, earning US$678.2m and US$606.6m, respectively.
In fourth place, China International Capital Corporation earned US$587.7m in fees in the first nine months of the year, up 40% from a year earlier. CICC’s fee income from equity capital markets deals jumped 120% from a year ago to US$166.2m. The bank’s earnings from follow-ons surged 244% to US$105.7m.
Guotai Haitong Securities came in fifth, earning US$538.8m for the period.
Deal activity in Greater China has picked up significantly this year, with a surge in A-to-H share listings, follow-ons and equity-linked deals keeping ECM bankers busy. Fundraising from China’s technology sector amid optimism linked to artificial intelligence and renewed government support for the sector has been a significant driver, while improved liquidity because of the US Federal Reserve's rate cuts and policy support from China is boosting activity in the consumer, healthcare and commodity sectors as well. The uptick has prompted a rebound in hiring, especially for Chinese bankers, from mainland and global banks.
“This year has been a very busy year for the Hong Kong market with strong growth compared to the same period last year and year before,” a Hong Kong based banker with a Chinese bank said.
“We did think this year will be better and we expected a recovery from the last two-three years, but we didn’t expect it to be this strong. It has beaten my expectations in a good way. Market sentiment is still very strong and bullish, and hopefully will spill over into next year,” the banker said.
Global banks are also benefiting from the rebound in activity from China, with three of them in the top 10 fee earners in Asia Pacific during the nine-month period. Morgan Stanley took the sixth spot after it earned US$491m, UBS came in eighth with a fee income of US$449.3m and Goldman Sachs took 10th place with fees of US$390m.
Morgan Stanley's total fee income jumped 47% year on year to US$491m after fees from equity capital market deals nearly doubled to US$303.9m. The bank was the top earner in equities.
While Hong Kong has seen a surge in listings, especially from mainland companies seeking secondary listings in the city, bankers say those deals are not the biggest fee earners. Income from follow-ons and equity-linked deals are padding wallets.
For instance, Morgan Stanley, despite being the top earner in equities, made only US$47.2m from IPOs. The remaining US$256.7m of its earnings in the category came from follow-ons and convertible bonds.
Bankers are also optimistic that the uptick in China deals will help the rest of the region, saying Chinese corporates are engaging in more cross-border activity.
“We see more and more Chinese companies looking at overseas markets. Use of proceeds from some of the deals we did this year are being spent overseas markets, in the rest of Asia and Europe,” the banker said.
For fee income from bonds, 24 of the top 25 earners were Chinese banks. HSBC Holdings slipped one spot from a year ago to 16 even as its earnings rose 18% to US$160.5m. Top-ranked Citic earned US$716.6m from bond market deals, up 14% from a year earlier.
HSBC took the first spot in G3 issuance after fees rose 13% to US$85.2m. JP Morgan came in second with US$73.9m. Credit Agricole jumped two spots to third after earning US$59.1m. Citigroup, which earned US$46.7m from G3 issuances, fell to fourth place from first a year ago.
For high yield issuance, JP Morgan jumped eight places to take the top spot after fees jumped 354% to US$11.7m. HSBC held on to second place with earnings of US$8.3m. Deutsche Bank, which had the top spot in the year-ago period, came in third after fee income tumbled 65% to US$7.6m.
In syndicated loans, Bank of China retained its top spot even as fee income slid 28% to US$171m. HSBC and DBS Group Holdings took second and third place, earning US$100.6m and US$91.7m, respectively.
By geography, China remained the largest contributor to banks’ Asia Pacific fee volumes, with deals bringing in US$11.7bn for the nine months to September. That compares to US$9.2bn last year.
Earnings in Australia and India also rose 14% and 12% to US$2.1bn and US$988.7m, respectively. Hong Kong saw fee income jump 40% to US$979.1m.
Fee income in Japan climbed 9.8% for the first nine months of the year to US$3.7bn. Mizuho Financial Group retained its top spot in Japan, earning US$577.6m for a 14.7% wallet share after an 18% year-on-year increase. Sumitomo Mitsui Financial Group’s fees for the period were flat at US$462.2m. Nomura Holdings, Morgan Stanley and Daiwa Securities Group held on to their third, fourth and fifth places, respectively.