Q1 2013 U.S. Investment Bank Round-Up: Debt Origination

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The global debt capital markets demonstrated strong growth over the first quarter of the year as the prevalent low-interest rate environment spurred demand for high-yield investment options among investors. Corporates around the world readily answered the call by finally going ahead with their capital raising plans that they had stalled in late-2011 when the economic conditions in Europe turned for the worse. The size of the global debt capital market was $1.52 trillion for Q1 2013.

The improvement witnessed by the industry clearly had a positive impact on debt origination fees pocketed by the banks around the globe. We had detailed our revenue expectations from the debt origination units at the largest investment banks for the quarter early last month in our article Banks Pocket Higher Debt Origination Fees As Issuance Climbs In Q1. Using data compiled by Thomson Reuters, the article also highlighted how much share of the global debt capital markets each of the world’s biggest investment banks garnered for the period.

In this follow-up article, we present a head-to-head comparison of the actual debt origination fees pocketed by the five biggest U.S. investment banks - Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Bank of America-Merrill Lynch (NYSE:MS) and Citigroup (NYSE:C) – in the first quarter, as reported in their earnings announcements.

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

The table below was compiled based on the banks’ earnings announcements and shows how much in debt origination fees each of the five banks earned for each of the last nine quarters.

($ mil) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Bank of America 845 939 515 587 774 645 865 1078 1022
JPMorgan 971 866 496 553 818 639 805 990 905
Goldman Sachs 486 433 168 196 410 495 466 593 694
Citigroup 504 615 446 389 606 490 594 634 634
Morgan Stanley 338 521 212 288 366 338 431 534 411

As seen in the table, Bank of America retained the top spot when it came to fees earned in the process of helping companies raise debt capital in Q1 2013, by generating more than $1 billion from the business for the second consecutive quarter. The bank has seen the highest debt origination fees in each of the last four quarters and in seven of the last eight quarters, which speaks volumes about its strong grip on the industry.

It must be mentioned here that in terms of market share, Bank of America actually ranked fifth among the global investment banks with 5.8% market share – far behind JPMorgan’s 8.3% (see Banks Pocket Higher Debt Origination Fees As Issuance Climbs In Q1). The higher revenues for Bank of America clearly means that the bank functioned as the lead underwriter in most of the deals it was involved in, allowing it to pocket more fees.

That said, the fees show an overall decreasing trend for these banks quarter-on-quarter, as the total fees for the five banks decreased from $3.8 billion in Q4 2012 to $3.7 billion in Q1 2013. Only Goldman Sachs, which has been working hard over the recent quarters to increase its presence in the global debt origination industry, saw a boost in fee revenues between the two quarters.

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