Q1 2013 U.S. Investment Bank Round-Up: Advisory Services

by Trefis Team
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Earlier this month, we tried to provide investors an overview of what to expect from the investment banking units at the country’s largest banks ahead of the earnings season through a series of articles which focused separately on advisory, debt origination and equity underwriting services. Now that all the banks are done reporting their results for the first quarter of the year, it is a good time to see how the U.S. investment banks fared with respect to each other in terms of the actual fees they generated through these activities in Q1.

We begin with a head-to-head comparison of M&A advisory 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).

Details about the share of the global M&A market that each of this bank captured for the period (in terms of completed deals) can be found in our article Big Banks Enjoy Higher M&A Revenues In Q1 Despite Slow Start For Advisory Services, in which we used data compiled by Thomson Reuters to forecast each bank’s performance based on its performance in the first quarter of 2012.

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

Q1 2013 was a rather slow period for advisory services, as evidenced by the fact that banks completed M&A deals worth $489 billion across the globe in Q1 2013 – a good 30% below the figure of $667 billion for Q4 2012. This also reflects in the advisory fees for the banks this quarter, which have declined considerably compared to the previous quarter.

The table below was compiled based on the banks’ earnings announcements, and shows how much in advisory 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
Goldman Sachs 357 637 523 470 489 469 509 508 484
JPMorgan 429 601 365 397 281 356 389 465 255
Morgan Stanley 385 533 413 406 313 263 339 454 251
Bank of America 320 382 273 273 203 341 221 301 257
Citigroup 143 198 184 159 111 202 196 206 204

Goldman leads by a huge margin here with the global investment bank retaining the top spot among M&A advisers for the eighth consecutive quarter. Goldman has consistently churned out revenues in the vicinity of half a billion each quarter through its M&A advisory unit over the last two years – a notable achievement for the bank.

It must also be mentioned here that Goldman ranked third in the M&A advisory industry for Q1 2013 (after Morgan Stanley and Barclays) in terms of market share even though it generated nearly twice as much revenues through this business than its nearest competitor. This goes on to highlight the fact that the bank is more often than not hired by companies as a lead adviser – allowing it to claim a larger share of the fees being offered compared to its competitors. This strong position that Goldman enjoys in the industry is the reason why we believe that its advisory revenues will only grow in the future as shown in the chart above.

Besides Goldman, all the other banks generated lower M&A revenues for the quarter compared to the last quarter of 2012 – a situation that will only change once the M&A market recovers from its current lows.

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