Upbeat Debt Underwriting Activity In Q3 Gives Bank Of America A Boost

by Trefis Team
Bank of America
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The third quarter of the year saw debt origination volumes swell further from the already elevated levels seen in the first half of 2017, and this in turn boosted debt origination fees across the industry to over $11.6 billion for the period. This represents a 6% improvement year-on-year as well as quarter-on-quarter. Bank of America did well for itself by pocketing $962 million in debt origination fees to garner a wallet share of more than 8%. Notably, this is the highest quarterly fee figure for any investment bank since JPMorgan’s $1.05 billion in Q4 2014.

Bank of America’s debt origination unit contributes about 4% of our $25 estimate for the bank’s shares.

While total debt origination fees for the five largest U.S. banks were an above-average $3.7 billion, this was lower than the figure for each of the first two quarters of 2017. The reason for this was the fact that debt capital market activity in their core U.S. market was extremely strong over the first two quarters of the year – something that can be attributed to the Fed’s rate hikes, as U.S. companies sought to raise fresh debt capital before additional rate hikes by the Fed. But the boost in debt origination activity for Q3 was spearheaded by the growing economies of India, Mexico, Russia and Brazil. Due to the more fragmented nature of the investment banking industry in these countries, the U.S. banks saw their combined wallet share fall to 32% from 36% in the previous quarter.

* Total debt origination fees for the industry include fees from syndicated loans

Total debt origination fees for the industry are taken from Thomson Reuters’ latest investment banking league tables. Figures for individual banks are as reported in their quarterly results.

The global debt origination industry is dominated by JPMorgan, Citigroup and Bank of America, along with U.K.-based banking giant Barclays. These four banks usually capture the largest share of the market in a given quarter, and also pocket the most fees. Bank of America regained the top spot in terms of total debt origination fees after being pushed to the #2 position by JPMorgan in the previous quarter. Notably, Bank of America pocketed more fees in the industry than any other global investment bank in five of the last seven quarters (except Q3 2016 and Q2 2017). You can see how changes to Bank of America’s debt origination fees affects our estimates for the diversified banking giant by modifying the chart below.

See the links below for more information and analysis about the 5 largest U.S. investment banks:

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

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