Q4 2014 U.S. Investment Bank Round-Up: Debt Origination

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The fourth quarter of 2014 saw a decline in activity across debt capital markets worldwide, with companies raising a little over $1.26 trillion of debt over the period compared to $1.32 billion for the previous quarter and $1.28 trillion for the year-ago period. We talked about this in detail last month as a part of our article Global Debt Capital Markets End 2014 On A Weak Note After Healthy Start, which was based on quarterly data released by Thomson Reuters. As debt origination fees generated by investment banks primarily depend on the number and size of deals they complete over a period, the sequential reduction in total deal size was expected to negatively impact Q4 revenues. Thomson Reuters estimated a 12.5% decline in fees for the industry as a whole. Using the same data, we concluded that largest players in the industry in terms of market share fared better than the industry when it comes to fees earned.

With the banks reporting their Q4 results over recent weeks, we now follow-up with a side-by-side comparison of the actual debt origination fees pocketed by the country’s five largest investment banks – Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Bank of America-Merrill Lynch (NYSE:MS) and Citigroup (NYSE:C) – as reported in their earnings announcements.

See the full Trefis analysis for Goldman SachsJPMorganMorgan StanleyBank of America | Citigroup

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The table below was compiled based on the banks’ earnings announcements and shows the debt origination fees that the five banks earned over the last five quarters as well as for the last two years.

(in $ mil) Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 FY’13 FY’14
Bank of America 986 1,025 891 784 883 3,805 3,583
JPMorgan 801 708 899 715 1,050 3,517 3,372
Goldman Sachs 511 660 730 444 406 2,367 2,240
Citigroup 488 578 748 632 550 2,178 2,508
Morgan Stanley 495 485 525 484 462 1,805 1,956
Total 3,281 3,456 3,793 3,059 3,351 13,672 13,659

JPMorgan gained the top spot in terms of debt origination fees for Q4 2014, earning a record $1.05 billion in these revenues for the period. This is the first time the country’s largest banking group has breached the $1 billion mark in its history. Interestingly, its closest competitor Bank of America is the only other bank to have achieved this feat, on three occasions in the past (Q4 2012, Q1 2013 and Q1 2014). Since the economic downturn of 2008, these two banks have held the top two spots among all global investment banks nearly every single quarter – highlighting their strong grip in the industry. Both of these financial giants gained substantial market share from their respective high-profile acquisitions during the downturn, with JPMorgan buying Bear Stearns and Bank of America merging with Merrill Lynch.

Notably, these banks also saw a sharp increase in debt origination fees compared to the previous quarter, as opposed to the industry-wide sequential decline which was also demonstrated by the other three banks. While JPMorgan’s revenues soared 47%, Bank of America’s revenues were 13% higher. In contrast, Citigroup witnessed the largest quarter-on-quarter decline of 13%.

Taken together, these five banks reported a 10% increase in their fee revenues compared to the revious quarter, with the Q4 2014 total also beating the year-ago performance by 2%. The improvement can be attributed almost completely to the exceptionally good results posted by JPMorgan for the quarter, allowing the aggregate figure to buck the expected trend.

In terms of full year performance, Bank of America emerged at the top of the list for the sixth consecutive year, with revenues of almost $3.6 billion. JPMorgan has retained its position at #2 globally for each of these years. It should be noted that both of these banks saw a decline in 2014 revenues compared to 2013. Goldman also suffered the same fate, while Citigroup and Morgan Stanley saw these revenues increase by 15% and 8% respectively.

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