Q2 2013 U.S. Investment Bank Round-Up: Debt Origination

by Trefis Team
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The second quarter of the year started off strong for the global debt market; however, the increasing likelihood of the Fed tapering its bond repurchase program coupled with the continuing unrest in Europe’s economy made companies more wary about issuing debt. As a result, total debt issuance shrank 6% from $1.52 billion in Q1 2013 to $1.44 billion in Q2 2013.

Also, the global debt markets saw the average deal size shrink considerably in the second quarter as there were actually more debt origination deals completed over the period than for any quarter in the last three years. The reduction in overall debt issuance and smaller average deal size was bound to have a negative impact on investment banks’ origination fees, something we detailed as a part of our article Banks Face Lower Fees From Smaller Debt Deals In Q2 last month. Based on quarterly data compiled by Thomson Reuters, which estimated a 20% reduction in debt origination fees for Q2 compared to Q1, the article highlighted that while the country’s five biggest investment banks will likely report an overall reduction in these fees, the decline would be much lower than the 20% figure.

Below we present a head-to-head comparison of the actual debt origination fees pocketed by the 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 second 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 the debt origination fees that the five banks earned for each of the last ten quarters.

($ mil) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Bank of America 845 939 515 587 774 645 865 1078 1022 987
JPMorgan 971 866 496 553 818 639 805 990 905 956
Goldman Sachs 486 433 168 196 410 495 466 593 694 695
Citigroup 504 615 446 389 606 490 594 634 634 558
Morgan Stanley 338 521 212 288 366 338 431 534 411 418

Bank of America retains the top spot in fees in Q2 2013 by generating just under $1 billion making this the third consecutive quarter in which the diversified banking giant brought in about $1 billion in debt origination fees. The bank has had the top spot in each of the last five quarters and in eight of the last nine quarters (except Q1 2012), a testament to its strength in the field.

It is noteworthy that in terms of market share, Bank of America actually ranked fifth among the global investment banks with a market share of 5.1% – well behind market leader JPMorgan’s 7.3% for Q2 2013. The higher revenues for Bank of America indicate that the bank functioned as the lead underwriter in more of the deals it was involved in, allowing it to pocket more fees.

That said, total debt capital market fees for these banks declined for the second consecutive period. The total fees for the five banks decreased from $3.8 billion in Q4 2012 to $3.7 billion in Q1 2013 and further to $3.6 billion in Q2 2013. With the ensuing turmoil in debt markets across the globe, this trend is likely to continue for the third quarter of the year.

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  • commented 1 years ago
  • tags: GS JPM C BAC MS
  • It can't be a better place to read and improve knowledge about stock broking or investment planning then your blog. It was a pleasant time which i spent on your blog. thanks for sharing such a valuable information with us. Hope to visit your blog again and read even more interesting articles from you.

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