Debt Origination Fees For Largest U.S. Banks Crossed $15 Billion For First Time In 2017

The five largest U.S. investment banks made the most of the increased demand for debt origination services globally in 2017 to pocket more than $15.2 billion in fees from debt capital market activities (including loan syndication). This is the most these five banks have made in a single year in history, and is well above the average figure of $13 billion for the prior five-year period. As a bulk of debt origination activity over the year was from U.S. companies looking to issue debt securities before the Fed’s rate hike process boosts interest rates, these banks also witnessed an increase in their global market share from ~34% over recent years to just over 35% in 2017.

We capture the trends in debt origination fees for each of these investment banks over recent years in detail as a part of our interactive model, while also forecasting how this revenue is likely to change in 2018. We highlight key observations related to their debt origination fees below.

JPMorgan, Bank of America Shared The Top Spot For 2017

Of the $15.2 billion in total debt origination fees for the five largest U.S. investment banks, JPMorgan and Bank of America were responsible for around $3.65 billion each – together contributing $7.3 billion (i.e. nearly half) to the total figure.

Total debt origination fees for the industry are taken from Thomson Reuters’ latest investment banking league tables, and also include fees generated by the banks from loan syndication activities.

Notably, JPMorgan and Bank of America have fought fiercely for the #1 spot in the debt origination league table over the years, with the top honors largely alternating between these banks each year since 2008. While Citigroup – the market leader before the economic downturn of 2008 – has ranked #3 over the years, Goldman has put in considerable effort over recent years to increase its presence in the debt origination industry. In fact, Goldman reported the highest debt origination fees among all investment banks globally in Q4 2017 – although this was likely a one-off event.

Strong Performance Also Translated To An Increase In Total Wallet Share

The chart below captures the total debt origination fees reported by the five largest U.S. investment banks since 2012. The green-to-red shading for figures along a row show the variations in these revenues for a particular bank over this period.

As seen here, debt origination fees for each of these banks were well above their individual average for recent years. In fact, the figure reported by each bank (except for Bank of America) was the highest they have ever reported for any year in history. Bank of America fared better on one occasion in the past – when it made $3.8 billion in 2013. This exceptionally strong performance by the U.S. banking giants helped their combined fee figure grow at a much faster rate than the industry total – helping their wallet share cross 35% from a figure of 33% in the previous quarter.

With the Fed forecasting a more optimistic rate hike schedule over coming years in its latest meeting, we expect a boost in debt origination volumes in the near future – something that will have a positive impact on fees generated by these banks for 2018 as well.

Details about how changes to Debt Origination Fees (and other Investment Banking Fees) affect the share price of these banks can be found in our interactive model for Goldman Sachs | JPMorgan | Morgan Stanley | Bank of America | Citigroup

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