Strong Debt Origination Push Helps Goldman Capture Largest Investment Banking Wallet Share In Q1

The five largest U.S investment banks reported almost $7.6 billion in total investment banking fees for Q1 2018 – a figure that includes their M&A advisory, equity underwriting as well as debt origination fees for the first three months of the year. This marks a notable reduction in these fees from the average figure of $8 billion over the previous four quarters – something that can be attributed to the fact that Q1 2018 was a weak period for M&A advisory as well as debt origination activity globally.

We capture the trends in M&A advisory fees, equity underwriting fees as well as debt origination fees over recent years in detail as a part of our series of interactive models focused on the U.S. investment banking giants, while also forecasting how these revenues are likely to change in 2018. We highlight key observations related to their total advisory & underwriting fees below.

Total investment banking fees for the industry are taken from Thomson Reuters’ latest investment banking league tables, and includes fees from M&A advisory, equity underwriting, debt origination and loan syndication activities.

The table below details the trend in total investment banking fees for each of these banks in the last five quarters. The green-to-yellow shading along a column highlights the relative performance of each bank in any given quarter. Notably, these banks usually capture around 33% of the global investment banking wallet share for any given quarter. However, their wallet share fell from over 35% in Q1 2017 to just 29% in Q4 2017 due to a jump in capital market deals in developing countries (China in particular), where local players enjoy a larger market share. The market share recovered to 33% in the previous quarter, though.

Goldman fared much better than its peers yet again in Q1 2018 – reporting investment banking fees just shy of $1.8 billion for the quarter. This helped the investment bank remain at the #1 position in terms of global wallet share for the second consecutive quarter – mostly due to Goldman’s increased push in the debt origination market over recent years. In fact, JPMorgan has largely dominated the #1 position since the economic downturn (with the diversified bank figuring at the top of the list for the five-quarter period from Q3 2016 to Q3 2017) due to its extremely strong presence in U.S. debt industry. As debt origination fees normally make up roughly 50% of total investment banking fees for these U.S. banks (with M&A advisory fees contributing ~30% and the remaining 20% coming from equity underwriting fees), a strong performance in the debt capital markets has a visible impact on a bank’s standing in this list.

Details about how changes to 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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