Citigroup Tops Global Debt Capital Market League Table For Third Consecutive Quarter, But JPMorgan Made The Most Money

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Thomson Reuters’ released its debt capital market league table for the third quarter of the year recently, and Citigroup did well to stay at the top of the list for the third consecutive quarter. While there has been a steady decline in the total volume of debt origination deals to close over recent quarters in developed markets (U.S. and EMEA), Citigroup continues to benefit from its geographically diversified presence – especially its strong footprint in key developing markets in Asia and Latin America. Notably, Citigroup’s market share of 5.2% in the extremely fragmented industry for Q3 2018 is well below of the average figure of 6.4% over the previous six quarters. This trend is not specific to Citigroup, though, as most of the largest investment banks in the world have seen their combined market share fall sequentially.

The five largest U.S. banks helped companies around the world raise $388 billion in new debt for the period – their weakest overall performance since Q4 2016. Their combined market share of just 22% makes Q3 2018 the worst period in this regard in at least eight years, and can be attributed to the growing market share of regional players in developing nations.

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JPMorgan and Citigroup have fought hard over recent years to capture the top spot in the fiercely competitive industry. While JPMorgan remains the undisputed leader in the U.S. and has an extremely strong presence in Europe, it has had less success making inroads into the high-growth Asia-Pacific region.

The chart below captures the total size of debt capital market deals completed by the five largest U.S. investment banks since Q2 2018. The green-to-red shading for figures along a row show the variations in deal size for a particular bank over this period.

Debt origination volumes for individual banks were taken from Thomson Reuters’ investment banking league tables for the last five quarters. The table below captures the respective market shares for each of these banks over this period. The green-to-yellow shading for figures in a quarter should help compare the relative standings of these 5 banking giants in a particular quarter.

It should be noted that the largest debt capital market deals employ more than one investment bank, and the market share figures here factor in the proportion of the total proceeds generated by a particular bank.

Some U.S. Banking Giants Expected To Buck The Trend Of Sequential Reduction In Fees

Thomson Reuters estimates the combined debt origination fees for these five U.S. investment banks to be less than $1.6 billion for Q3 2018 – a sequential reduction of 6% from the $1.65 billion figure for the previous quarter, and a sizable fall of 23% from the $2 billion figure a year ago. It should be noted that Q3 2017 saw an unusually high level of debt origination activity in the U.S. as companies rushed to raise capital at low prevailing interest rates before the Fed’s hawkish rate hike schedule increased the cost of debt. However, as U.S. debt origination volumes fell sequentially at a slower rate than for other regions in Q3, the wallet share of the five largest banks increased from 23.5% in Q2 2018 to 24.8% in Q3 2018.

While Citigroup is likely to report a ~20% reduction in debt origination fees compared to the previous quarter, Bank of America and Goldman Sachs stand out with these fees likely to increase by ~5% sequentially. Notably, Citigroup ranks #3 in terms of expected debt origination fees for the quarter, after JPMorgan and Bank of America. JPMorgan’s strong performance can be attributed to the fact that it played a role in more deals than any other bank globally (358 compared to 347 for Citigroup). Taken together with JPMorgan’s lower total deal volume, this implies a lower average deal size for JPMorgan in Q3 ($244 million) compared to Citigroup ($262 million). As larger deals generate less fees per dollar of debt originated, JPMorgan made more money in the process. As for Bank of America, debt origination fees are expected to be only marginally lower than that for JPMorgan despite the bank playing a role in a much smaller number of deals (278). This would suggest that the banking giant played key roles in some of the largest deals that closed in Q3 – boosting its fee figure.

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 SachsJPMorganMorgan StanleyBank of America | Citigroup

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