Q4 2013 U.S. Investment Banking Round-Up: Equity Underwriting

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Earlier this month, we highlighted the marked turnaround demonstrated by the global equity markets over the last quarter of 2013 as a part of our article Strong Equity Market Activity In Q4 Boosts Underwriting Fees For Banks. Based on Thomson Reuters’ quarterly investment banking league tables, the article estimated a quarter-on-quarter increase of at least 30% in the equity underwriting fees of each of the country’s biggest investment banks - Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Bank of America-Merrill Lynch (NYSE:MS) and Citigroup (NYSE:C). The equity deal volume in Q4 2013 of $264.4 billion was the best quarterly figure in three years, and Q3 2013 was one of the slowest quarters for equity markets since the economic downturn. Both these factors taken together were bound to make Q4 revenues at the banks look much better in comparison to those in Q3.

With the banks reporting their Q4 results over the last two weeks, we now follow-up with a side-by-side comparison of the actual equity underwriting fees these banks generated for the period.

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

The quarterly data from Thomson Reuters estimated a 34% increase in equity underwriting fees for the industry as a whole for Q4 compared to Q3 2013. The top banks handsomely outperformed the industry with the five of them raking in 64% higher fees in Q4.

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 five quarters as well as the last three years.

(in $ mil) Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 FY’11 FY’12 FY’13
Goldman Sachs 304 390 371 276 622 1,085 987 1,659
JPMorgan 265 273 457 333 436 1,181 1,026 1,499
Bank of America 250 323 356 329 461 1,454 1,026 1,469
Morgan Stanley 237 283 327 236 416 1,132 891 1,262
Citigroup 163 225 266 174 282 672 629 947
Total 1,219 1,494 1,777 1,348 2,217 5,524 4,559 6,836

Goldman Sachs saw its equity underwriting fees jump 125% to $622 million – the highest for any bank in a quarter at least in the last three years. The strong performance by the investment bank over the first two quarters of the year too pushed it to the top spot for the year dethroning the regulars JPMorgan and Bank of America. Goldman also ranked first in Q4 2013 in terms of market share (11.9%) – consolidating its #1 position for the year with a 11.4% market share.

With a largely similar last quarter, JPMorgan and Bank of America garnered 7% share of the market apiece – earning $450 million each in the process. Both the banks ended the year with $1.5 billion in equity underwriting fees.

Quite notably, Morgan Stanley figures at fourth spot on this list despite being a part of more deals (145) than any of the other banks, and also ranking second in terms of market share for the quarter (8.1%). This would indicate that the bank likely played secondary roles in the biggest IPOs and follow-on offerings that went through last quarter.

We believe that the equity markets witnessed an unusually high amount of activity in Q4 as companies who shelved their equity issuance plans over the previous quarter went ahead with raising capital over the period. Consequently, we expect the value of equity deals to normalize this quarter.

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