The first quarter of the year proved to be profitable for the equity underwriting units at investment banks as companies around the globe ventured into the equity capital markets to raise fresh capital by resorting to IPOs and follow-on offerings – something they had been averse to since mid-2011, when the economic condition in Europe turned for the worse. Early last month, we came up with ballpark figures for the equity underwriting fees the largest global investment banks were expected to report for Q1 2013 as a part of our article Strong Q1 Equity Markets Should Boost Equity Underwriting Revenues. Based on data compiled by Thomson Reuters, we also highlighted how much share of the global equity capital markets each of the world’s biggest investment banks garnered for the period.
Now that all the banks have actually reported their first quarter results, 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. In this article, we present a head-to-head comparison of equity underwriting 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).
Overall, the U.S. I-banks saw a strong growth in their equity underwriting fees for Q1 2013, with the total fee revenues for the five banks being just under $1.5 billion. This is near 25% growth to the $1.2 billion in equity underwriting fees for these banks in the previous quarter, as well as in the first quarter of 2012.
The table below was compiled based on the banks’ earnings announcements, and shows how much in equity underwriting fees each of the five banks earned for each of the last nine quarters.
|($ mil)||Q1 2011||Q2 2011||Q3 2011||Q4 2011||Q1 2012||Q2 2012||Q3 2012||Q4 2012||Q1 2013|
|Bank of America||448||422||316||268||305||192||279||250||323|
As seen in the table, Goldman Sachs made the most by helping companies raise equity capital in the first quarter, and was comfortably placed ahead of the competition in terms of fees generated in the process. Goldman grew the fee revenue by almost 30% q-o-q, by capitalizing on its strong reputation in the recovering industry.
Despite seeing a jump of nearly 40% in its equity underwriting revenues compared to the previous quarter, Citigroup finds itself at the bottom of the list. It must be mentioned here that Citigroup grabbed the second largest share of the market in terms of deal size (after Goldman), but this did not translate into higher revenues, as the bank worked as a second-tier underwriter in a majority of the deals (see Strong Q1 Equity Markets Should Boost Equity Underwriting Revenues).
Quite notably, JPMorgan showed the slowest growth in revenues compared to the previous quarter, with the fee income remaining almost flat. As you can see from the chart above, the bank saw a marked decline in equity underwriting fee revenues in 2012. And we expect the figures to remain at current lows over the future, with competition continuing to exert downward pressure on revenues going forward.