Investment banking revenue tumbles to lowest level since financial crisis
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.