In­vest­ment bank­ing rev­enue tum­bles to lowest level since fi­nan­cial cri­sis

The Pak Banker - - FRONT PAGE -

NEW YORK: At the start of each week, MoneyBeat pub­lishes a re­port high­light­ing a statis­tic get­ting trac­tion in the mar­kets. This week's "big num­ber" is $12.8 bil­lion, the amount paid to in­vest­ment banks glob­ally for ad­vice on M&A, debt and eq­uity un­der­writ­ing and syn­di­cated loans, the lowest quar­terly to­tal since the first quar­ter of 2009. The volatil­ity that racked mar­kets ear­lier this year is weigh­ing on the per­for­mance of in­vest­ment banks this quar­ter. Global in­vest­ment-bank­ing rev­enue-fees paid for ad­vice on merg­ers and ac­qui­si­tions, debt and eq­uity un­der­writ­ing and syn­di­cated loans-stands at $12.8 bil­lion this year, ac­cord­ing to Dealogic. That is down 36% from the first quar­ter of 2015 and marks the lowest quar­terly to­tal since the first quar­ter of 2009 at the height of the fi­nan­cial cri­sis. Mar­kets across the globe tum­bled to start the year as in­vestors fled risky as­sets, such as eq­uity and high-yield bonds.

The lack of de­mand caused the is­suance of junk bonds and eq­uity, par­tic­u­larly ini­tial pub­lic of­fer­ings, to dry up. The value of eq­uity and high-yield bonds com­ing to mar­ket glob­ally this quar­ter is down 46% and 68%, re­spec­tively. Ini­tial pub­lic of­fer­ing vol­ume tum­bled 74% world-wide, ac­cord­ing to Dealogic. This slump is hit­ting the top lines of in­vest­ment banks as the first quar­ter comes to a close. In­vest­ment banks gen­er­ated just $2.3 bil­lion in fees from un­der­writ­ing eq­uity of­fer­ings. That is down 55% from the same pe­riod last year and ac­counts for just 18% of over­all in­vest­ment-bank­ing rev­enue in the quar­ter, its lowest share in 13 years, ac­cord­ing to Dealogic. Rev­enue from IPOs is off 74% from the first quar­ter of 2015.

Fees from sell­ing debt this year sit at $4.1 bil­lion, down 32% from the first quar­ter of last year. The slide was driven by a 70% tum­ble in rev­enue from sell­ing junk bonds, ac­cord­ing to Dealogic. Work ad­vis­ing com­pa­nies on merg­ers and ac­qui­si­tions or syn­di­cat­ing loans pro­vided no lift ei­ther. Rev­enue from both was down more than 25%. The one bright spot came from China, where rev­enue from debt of­fer­ings reached $615 mil­lion this quar­ter, up 79%, ac­cord­ing to Dealogic.

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