Investment bank fees fall in Asia, but M&A volume up
HONG KONG, March 26 (Reuters) - Investment banking fees have fallen 5.4 percent in Asia this year, hurt by economic worries, a string of pulled IPOs and a drop in debt issuance as credit-crunch weary investors stick to the sidelines.
But an uptick in merger and acquisition fees, even amid global economic turbulence -- with Chinalco's $14 billion purchase of a stake in global miner Rio Tinto (RIO.AX)(RIO.L) the headliner -- has Asia-based investment bankers hopeful that the fee pipeline will hold up through the next few quarters.
With the first quarter coming to a close, Asia Pacific investment banking fees slipped to $2.1 billion from $2.2 billion last year, according to Thomson Financial. The data includes Australia, and excludes Japan.
Equity and debt issuance fees in Asia are down 16 percent and 52 percent respectively, Thomson says, as the credit crunch has scared off once-keen foreign investors.
Successes such as China Railway Construction's (1186.HK) (601186.SS) $5.4 billion listing have been overshadowed by shelved deals from the likes of China Pacific Insurance (601601.SS), which pulled a $4 billion Hong Kong listing, and Emaar MGF Land, which halted its $1.6 billion Mumbai IPO.
But investment bankers saw the uptick in merger and acquisition fees, albeit slight, as a positive sign, given the plunge in M&A activity in the United States and Europe.
"I am cautiously optimistic that investment banking in Asia will remain buoyant for the remainder of the year," said Mark Renton, Citigroup's head of investment banking, Asia Pacific.
"Asia's emerging global champions continue to seek out opportunities to grow their businesses and financing is readily available given the significant pools of capital in the region," he added. "You will continue to see outbound M&A from India and China."
U.S. automaker Ford (F.N), for example, has reached a deal to sell its Jaguar and Land Rover to India's Tata Motors (TAMO.BO) for more than $2 billion, according to sources familiar with the matter.
China's Sinosteel Corp earlier this month offered A$954 million ($902 million) for prospector Midwest Corp MIS.AX to lock up future iron ore supplies, marking the first hostile bid by a Chinese firm in Australia's booming mining sector.
"What you have are value opportunities in the credit-hit Western markets where valuations are beginning to fall to more attractive levels for Asian buyers," said Colin Banfield, head of Asia M&A at Lehman Brothers.
UBS topped the first quarter Asia Pacific investment banking league table in terms of fees, with 45 deals bringing in $80 million. Citigroup was second, with $75.2 million in fees on 68 deals, while China's Citic Securities was third with 5 deals generating $55.9 million in fees, by Thomson's calculation.
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Although the extent of the credit crunch's damage across Asia is so far minor compared to the United States and Europe, ripples from the turmoil have traveled across the globe. Continued...
