In buoyant Asia markets, block trade surge delivers Goldman windfall

HONG KONG/MUMBAI: As investors tap into rising Asia Pacific stock markets to sell assets in waves of block trades, Goldman Sachs’ dominance of such deals has already brought more in fees in 2015 than in the previous two years combined.

As shares climb, private equity firms and others looking for quick off-market investment exits have lifted Asia block trades to nearly US$21 billion so far this year, on track to beat 2012’s record US$57 billion.

Goldman has cornered more than half of Asia Pacific’s 2015 block deals, booking US$112 million in estimated fees from firms like Japan’s Daiichi Sankyo and Chevron , according to Thomson Reuters/Freeman Consulting data – more than similar-deal fees for 2013 and 2014 combined.

Though fast and clean for sellers, block trades are less lucrative for banks than initial public offerings and carry risks – if the banks can’t sell the shares, they’re stuck with them.

But Goldman, leader in Asia Pacific block transactions in five of the past six years, has clinched sole mandates in record deals in China, Australia and India in 2015, parlaying its scale into profit in a growth business it’s set to keep leading.

“To succeed in the blocks business you need strong client relationships and distribution capability, but just as critical is risk management,” said Jonathan Penkin, co-head of Financing Group for Goldman Sachs in Asia Pacific, excluding Japan.

“Every transaction we do comes only after an enormous amount of consideration by a group of operational, legal and market risk officers around the world.”

Market watchers say Goldman’s tactic of gunning for sole mandates on big block trade deals may impress clients as a display of commitment to getting transactions done. As global rivals like UBS and Morgan Stanley shy away from block deals, according to Thomson Reuters data, Goldman’s gambit may bolster its position as a goto bank for a range of other Asia transactions. — Reuters