Banking fees weakest since 2009

IFR 1965 5 January to 11 January 2013
2 min read
Americas, EMEA, Asia

With the exception of DCM underwriters, most investment bankers are likely to be glad that 2012 was over.

Global investment banking fees were down 3% to US$74.8bn, compared to 2011. The 2012 figures were the weakest since 2009, according to data from Thomson Reuters/Freeman Consulting.

Investment bankers who worked in the equity capital markets experienced a torrid year, with global fees down 17%, to US$15.6bn, from 2011. Last year was the slowest year for ECM fees since 2003.

Investors wanted to steer clear of equity deals in 2012, as they adopted a risk-averse attitude. This was reflected by the amount of money that exited equity funds and poured into debt.

The IPO market was particularly hard-hit, with fees down 29.7% to US$4.9bn, from 2011. The tech sector was the dominant business in this space but it was brought to halt for a few months after the troublesome Facebook IPO.

With low interest rates and investors seeking more stable assets, the DCM business proved extremely lucrative, with fees up 26% to US$22.5bn, compared to 2011. Corporations kept coming back to the market as yields continued to march lower and lower.

Conversely, M&A fees were lacklustre, as economic uncertainty and new regulations unnerved many corporate boardrooms. M&A fees fell 12% to US$20.5bn, compared to 2011. Global loans fees declined 8%, to US$16.1bn, compared to a year ago.

JP Morgan was the number one fee earner in 2012, generating fees of US$5.6bn, increasing its market share from 7.4% to 7.5%. This slight jump was the result of its strong global DCM business, where fees were up 34% from 2011 to US$1.95bn.

Bank of America, which came in second, saw its market share drop from 6.7% to 6.5%. BofA’s decline was the result of ordinary global M&A and loan fees.

The majority of investment banking fees came from North America, where levels were up 5.8% to US$40.5bn, compared to 2011. European and Asian (ex-Japan) activity plummeted. European fees were down 16.9% from a year ago to US$17.1bn, while Asia (ex-Japan) were down 17.8% to $9.5bn.

However, Japan bounced back in 2012, with investment banking fees up 18% to US$4.18bn.

The entrance to JP Morgan Chase's international headquarters on Park Avenue is seen in New York