Investment Banking Fees At Largest U.S. Banks Fell In Q3 Despite Overall Industry Improvement

by Trefis Team
JPMorgan Chase
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The five largest U.S investment banks pocketed total advisory & underwriting fees of $7.65 billion for the third quarter of the year – indicating an overall strong performance by the banks, as the average quarterly figure for these banks since 2013 has been $7.15 billion. While the Q3 2017 figure is 8% above the figure for the year-ago period, it represents a 5% sequential decline – something that stands out given the fact that industry-wide investment banking fees nudged 1% higher sequentially. The discrepancy can be explained by the fact that a bulk of the growth in debt and equity capital markets for Q3 was from emerging economies, where the U.S. banks face stiff competition from local players.

JPMorgan did well for the quarter, though, to report the highest advisory & underwriting fees for any investment bank globally for the fifth consecutive quarter. JPMorgan’s advisory & underwriting operations contribute almost 10% of our $98 price estimate for the diversified banking giant’s shares.

Total investment banking fees were primarily helped by a spike in M&A advisory fees for Q3, although this could not make up for the sizable sequential reduction in fees from equity underwriting as well as debt origination operations. It should be noted that debt origination fees usually account for roughly 50% of total investment banking fees, while M&A advisory fees contribute another 30-35%. The remaining 15-20% is equity underwriting fees.

The table details the trend in total advisory & underwriting 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.

Total advisory & underwriting fees for the industry are taken from Thomson Reuters’ latest investment banking league tables. Figures for individual banks are reported as a part of their quarterly results.

Notably, these five banks pocket roughly one-third of all investment banking fees globally in a quarter. JPMorgan dominates this list thanks to its extremely strong presence in the U.S. and European debt capital markets. You can see how changes to JPMorgan’s debt origination market share impacts our price estimate for the bank 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

View Interactive Institutional Research (Powered by Trefis):
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