Listings revival helps lift investment banking fees in 2013

Fri Dec 20, 2013 4:00am EST

* Banks earn fees of $74.7 bln in 2013 (2012: $71.3 bln)

* JPMorgan ranked top for investment banking fees

* Fees earned from share offerings up 32 pct on year

By Clare Hutchison

LONDON, Dec 20 (Reuters) - Fees earned for investment banking services rose 5 percent in 2013 as companies, spurred on by a stock market revival, hired banks to advise on share offerings in a bumper year for equity fundraising.

Investment banking fees totalled $74.7 billion as of Dec. 18, up from $71.3 billion in the same period in 2012, according to data from Thomson Reuters and Freeman Consulting.

U.S. bank JPMorgan Chase & Co was the top ranked bank in terms of fees, raking in a total of $5.8 billion year to date. Bank of America Merrill Lynch and Goldman Sachs were second and third, respectively.

The increase will be a welcome piece of news for investment banks, which have faced slumping trading revenues, a series of regulatory investigations and, in some cases, multi-billion dollar fines in 2013.

Fees earned from share offerings showed the strongest growth. Banks were paid $17.5 billion for equity capital markets (ECM) underwriting, 32 percent higher than in the previous year and the most since 2010, the data showed.

A total of $774 billion has been raised worldwide from offerings so far this year, a rise of 24 percent on 2012.

Goldman Sachs earned $1.5 billion for its ECM work, jumping three places to top the league table, ahead of last year's leader JPMorgan.

Loan fees also shot up, rising 17 percent year-on-year to reach $15 billion, a six year high.

Fees earned from mergers and acquisitions (M&A) advice, however, fell 11 percent to $20.9 billion, the lowest year for M&A fees since 2009.

The value of worldwide M&A activity fell 2 percent to $2,310 billion, with 2013 the slowest year by number of deals since 2005.

Bankers said many companies are still lacking confidence in an economic recovery, despite a surge in equity markets this year, and are waiting to pull the trigger on deals until there is a more stable long-term economic outlook.

"CEOs say the market is already ahead of itself ... they are focusing on the little things they can do. We've been working more in the weeds rather than executing," said one senior London-based investment banker.

The highest grossing deal of the year in terms of fees was IntercontinentalExchange's $10.2 billion takeover of exchange group NYSE Euronext. Advisors on the transaction shared a total $147.7 million.

Debt capital market underwriting was also a weak spot. Fees for bond deals sank 2 percent versus 2012 to $21.3 billion.

The prospects for advisory fees in 2014 look a little brighter, bankers said, especially for M&A, which they expect to get busier provided the global economy continues to recover.

"I'm cautious but optimistic. I don't think there will be a step change, but I do think we are going to see improvement," one M&A banker said.

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