Q1 2015 U.S. Investment Bank Round-Up: Debt Origination

The global debt capital markets saw a considerable improvement in activity over the first three months of the year compared to the previous quarter, with companies around the globe raising $1.58 trillion through debt issuances. Last month, we detailed this in our article Q1 Debt Origination Revenues Likely To Be High Despite Lukewarm Activity, based on quarterly debt origination data released by Thomson Reuters. The strong level of activity also meant more fee revenues for investment banks. Thomson Reuters estimated a 4.6% increase in fees for the industry as a whole in Q1 2015 compared to Q1 2014, and a near-30% jump in fees over Q4 2014.

Now that the banks are done reporting their Q1 results, we follow up with a side-by-side comparison of the actual debt origination fees pocketed by the country’s five largest investment banks – Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Bank of America-Merrill Lynch (NYSE:MS) and Citigroup (NYSE:C).

See the full Trefis analysis for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

The global debt capital markets grew to $1.58 trillion in size in Q1 2015 – slightly higher than the $1.57 trillion figure for the same period last year and 25% above the $1.26 trillion in Q4 2014. Also, the number of debt origination deals for the period swelled to 3,748 compared to 3,265 a year ago. As investment banking fees from debt origination activities are influenced by both the number of deals as well as the absolute size of deals, the quarter was a strong one for banks in terms of revenues.

The table below was compiled based on the banks’ earnings announcements and shows the debt origination fees that the five banks earned over the last five quarters.

JPMorgan retained the top spot in terms of debt origination fees for a second consecutive quarter in Q1 2015, earning $820 million in these revenues for the period. This performance follows the record $1 billion in revenues the banking giant reported for the first time in the previous quarter. Bank of America came in at a close second with just under $800 million in revenues. Notably, these two banks have held the top two spots among all global investment banks nearly every single quarter since the economic downturn of 2008 – highlighting their strong grip in the industry. Both of these financial giants gained substantial market share from their respective high-profile acquisitions during the downturn, with JPMorgan buying Bear Stearns and Bank of America merging with Merrill Lynch.

There is considerable variation in the revenue figures reported by each of the banks in this quarter compared to the previous as well as the year-ago periods. While Bank of America and Morgan Stanley witnessed a reduction in revenues in Q1 2015 with respect to each of the comparable periods, Citigroup was the only bank to report a trend in line with that for the industry. As JPMorgan and Goldman Sachs reported exceptionally strong results in Q4 2014 and Q1 2014 respectively, their revenues for Q1 2015 were much lower in comparison.

Total annual debt capital market fees for these five banks fell from $3.5 billion in Q1 2014 to $3.1 billion – an 11% decline. The sum was also 8% lower than what it was for the previous period. This means that debt origination fees at the largest investment banks stands in sharp contrast to the trend seen in the overall industry, where revenues were roughly 5% higher year-on-year and a good 30% higher quarter-on-quarter.

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