Q4 2013 U.S. Investment Bank Round-Up: Debt Origination

by Trefis Team
Bank of America
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Things did not change much for the global debt capital markets between the third and fourth quarters of 2013, with uncertainty about the timing of the Fed’s tapering plans keeping activity limited. We talked about this in detail earlier this month as a part of our article Debt Origination Figures Remain Depressed In Q4 which was based on quarterly data released by Thomson Reuters. In the article, we also estimated the change in debt origination fees for the five banks which garnered the largest share of the industry over Q4 2013, and came to the conclusion that the largest investment banks fared worse than the industry in this regard.

With the banks reporting their Q4 results over the last couple of weeks, we now follow-up with a side-by-side 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) – 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 over the last five quarters as well as for the last three years.

(in $ mil) Q4’12 Q1’13 Q2’13 Q3’13 Q4’13 FY’11 FY’12 FY’13
Bank of America 1,078 1,022 987 810 986 2,886 3,362 3,805
JPMorgan 990 905 956 855 801 2,886 3,252 3,517
Goldman Sachs 593 694 695 467 511 1,283 1,964 2,367
Citigroup 634 634 558 498 488 1,954 2,324 2,178
Morgan Stanley 534 411 418 481 495 1,359 1,669 1,805
Total 3,829 3,666 3,614 3,111 3,281 10,368 12,571 13,672

Bank of America regained the top spot in terms of debt origination fees after losing out to JPMorgan in Q3. The two diversified banking groups have featured at the top two spots in this list for at least the last 12 quarters, with JPMorgan also garnering the largest share of the industry each quarter over the last two years. Bank of America has had the edge in terms of revenues, though, making more money than any other investment bank worldwide in 9 of the last 12 quarters (the exceptions being Q1 2011, Q1 2012 and Q3 2013).

Bank of America saw its revenues jump 22% sequentially, making just under a billion dollars for the quarter – in line with what it made for each of the quarters from Q4’12 to Q2’13. It should be noted that the bank’s Q3 revenues were notably lower because of a decline in the number of deals it participated in (312 in Q3 vs. 361 in Q2) as well as from playing a secondary role in some of the biggest deals that went through that period.

As opposed to our initial estimates of the top banks together reporting larger declines in debt origination fees when compared to the industry-level decline of 7% for Q4, the actual figures show that the banks fared much better than that. With a 6% decline quarter-on-quarter, JPMorgan was the worst performer in this regard. Quite notably, Goldman Sachs and Morgan Stanley joined Bank of America in generating more fee revenues in Q4.

That said, total annual debt capital market fees for these five banks increased from $12.6 billion in 2012 to $13.7 billion in 2013 thanks to exceptionally strong performance over the first half of the year. With the Fed beginning the implementation of its tapering plan this month, the debt markets are likely to grow considerably over subsequent quarters.

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