Citigroup’s Global Presence Boosts Equity Underwriting Fees Despite Poor Industry Activity

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Equity underwriting fees for the five largest U.S investment banks fell sharply to $1.26 billion in Q3 2017 from an average figure of $1.6 billion over the previous two quarters, as a notable reduction in global equity capital market activity weighed on revenues across the industry. While JPMorgan held on to the top spot despite a 20% reduction in these fees sequentially, Citigroup leveraged its stronger geographical footprint to report revenues that were only marginally lower than the figure for the previous quarter.

Citigroup’s equity underwriting unit contributes less than 3% of our $75 estimate for the diversified banking giant’s shares.

Notably, the wallet share for these U.S. banks in the global equity underwriting industry has fallen for two consecutive quarters now –  from 32% in Q1 2017 to 27% in Q3 2017. This is because Q1 saw a jump in U.S. IPO activity, which then declined over the next two quarters. That said, the EMEA (Europe, Middle East and Africa) region fared better than usual in Q2, while the third quarter turned out to be a good period for equity deal making in the Asia Pacific region.

Total equity underwriting 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 five largest U.S. investment banks compete fiercely in the global equity underwriting industry, with top honors in terms of the highest equity underwriting fees shifting among Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America from quarter to quarter since early 2011. This makes Citigroup’s strong showing in Q3 stand out, as the banking giant ranked #5 among these banks in 27 of the 31 quarters since the beginning of 2008. The bank’s fortunes in the equity capital market have improved over the last two quarters due to increased deal activity in Asia (where Citigroup has a stronger presence than its U.S. peers), and also because the bank has worked on growing its equity underwriting desk over recent years.

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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