Banks Pocket Higher Debt Origination Fees As Issuance Climbs In Q1

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According to the latest quarterly debt capital markets data compiled by Thomson Reuters, companies around the world raised $1.52 trillion in fresh capital over the first quarter of the year through new debt offerings. [1] While this figure is well below $1.67 trillion in debt issued in Q1 2012, it must be remembered that the figure for the same quarter last year was pumped up by a sudden increase in debt market activity following a lull in the latter half of 2011 when the economic condition in Europe turned for the worse. Neglecting the figure for Q1 2012, debt origination volumes have grown steadily from $950 million in Q3 2011 to $1.35 trillion in Q4 2012.

JPMorgan (NYSE:JPM) grabbed the largest share of the debt capital market yet again this quarter followed by German banking giant Deutsche Bank (NYSE:DB) and U.K.-based Barclays (NYSE:BCS). Citigroup (NYSE:C) and Bank of America-Merrill Lynch (NYSE:BAC) complete the list of top-five debt originators for the quarter. Quite notably, the list of top-five features the same five banks each year for a decade now.

See the full Trefis analysis for Deutsche BankBarclaysJPMorganBank of AmericaCitigroup

The table below summarizes the performance of the debt origination unit at each of the top five banks based on data compiled by Thomson Reuters.

Bank Rank Proceeds Mkt. Share # Deals Avg. Deal Size Q1’13 Imputed Fees Q1’12 Imputed Fees
JPMorgan 1 $126.7 B 8.3% 468 $271 M $575 M $517 M
Deutsche Bank 2 $109.0 B 7.2% 439 $248 M $405 M $353 M
Barclays 3 $102.4 B 6.7% 355 $288 M $327 M $310 M
Citigroup 4 $89.1 B 5.9% 342 $261 M $428 M $388 M
Bank of America 5 $87.5 B 5.8% 367 $238 M $494 M $421 M

JPMorgan maintained the top spot among all debt originators around the world for five straight quarters now. The bank was also ranked #1 in terms of number of deals as it played a part in 468 of 3,590 deals for Q1 2013 – a good 13% share of the market. It must be, however, noted that the large-sized debt origination deals normally have more than one bank working on them. Hence, the market share in terms of deal volume as well as the number of deals are not mutually exclusive.

The average deal size among the top performers in the debt capital market remained roughly around $250 million with Barclays recording the highest figure of $288 million. This is largely a result of the British bank’s strength in Europe and Africa.

As far as revenue from the debt offerings are concerned, JPMorgan has emerged on top in that category too, with imputed fees of $575 million for the period being a good 15% ahead of the nearest competitor Bank of America ($494 million). It must be noted here that imputed fees are merely an estimate based on historical data about fees demanded by the banks for a particular role in the equity underwriting process, and the numbers the banks actually report would differ from these figures.

But these numbers do give a good indication of what to expect. Given that imputed fees for all the banks listed above show an increase in Q1 2013 compared to Q1 2012 (with a few of them gaining in excess of 10%), we can expect the banks to report considerably higher debt origination revenues for Q1.

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Notes:
  1. Global Debt Capital Markets Q1 2013, Thomson Reuters Deals Intelligence []
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