Investment banking fees drop
Fees from advising on transactions and for debt and equity issuance in the first quarter have dropped to the lowest level in seven years, with businesses hunkering down in a weak economy refraining from pursuing large M&A deals.
Fees from advising on transactions and for debt and equity issuance in the first quarter have dropped to the lowest level in seven years, with businesses hunkering down in a weak economy refraining from pursuing large M&A deals.
According to a report released on Monday by Refinitiv, one of the world’s biggest providers of financial markets data and trading terminals, the first quarter of the year shows that investment banking fees dropped to $99m in SubSaharan Africa, 39% lower than a year ago, and the lowest level since 2014.
The pain was most evident in fees for advising on M&A, equity issuance (initial public offerings and secondary offerings) and syndicated lending, which are all lower in 2021.
The bosses of the local arms of Goldman Sachs and Bank of America have told Business Day that foreign investors are interested in local companies on account of their cheap valuations, but concerns over the pace of structural reforms have acted as a deterrent to more activity inside the country.
DOMESTIC M&A WAS BUOYANT FROM A VALUE PERSPECTIVE BUT THE NUMBER OF DEALS DROPPED
While fees from M&A declined 65%, it was not for lack of activity. Inbound and outbound M&A deals increased over 2020’s first-quarter levels but the value of the latter declined by two-thirds.
Domestic M&A was buoyant from a value perspective, increasing by two-thirds to $2.5bn, but the number of deals dropped sharply.
The biggest deal of the quarter saw the Zambian government through its investment arm acquiring Mopani Copper Mines for $1.5bn.
Nasdaq-listed B Riley Financial led the investment banking league tables with a haul of $19.8m for the quarter, largely on account of its work in equity issuance. It was followed by Bank of America, Standard Chartered and JPMorgan.
Investment bankers earned money from governments and corporations seeking to bolster their cash buffers as the timing of the third wave of Covid-19 infections alongside lockdown restrictions remains unclear.
Fees for underwriting debt issuances — such as corporate and sovereign bond issues — doubled to $47.1m, the highest total since Refinitiv began tracking fees in 1980. The fees were earned from a greater value of debt issued in the region which most notably included Ghana’s $2.9bn Eurobond issuance and the African Development Bank’s $2.5bn five-year bond auction.
Despite Ghana providing the single biggest foreign-denominated bond issuance, it was the Ivory Coast that issued the most debt cumulatively during the quarter at $3.7bn. (The figures do not track government bond issuance in domestic currency).