Global equity markets saw a marked turnaround from the extremely
slow Q3 to record the strongest quarter in three years for Q4 2013,
according to data compiled by Thomson Reuters. ((
Global Equity Capital Markets Q4 2013
, Thomson Reuters Deals Intelligence)) Companies across the globe
raised $264.4 billion through IPOs and follow-on offerings in the
last quarter - a good 82% higher than the $145.1 billion figure for
the third quarter and the best since the bumper $350 billion
proceeds seen in Q4 2010. Solid performance over the first half of
the year helped equity underwriting deals worth just under $800
billion go through in 2013.
The trend witnessed in equity capital markets for the second
half of the year is readily justified by the fact that corporate
firms grew wary of raising fresh capital in the third quarter.
That's when the Fed's initial announcements of a tapering plan cast
a shadow of uncertainty over global markets. Once the markets
stabilized in Q4, these firms went ahead with their equity
offerings - boosting underwriting activity for the period.
A great quarter for the equity markets would obviously translate
into higher equity underwriting fees for the investment banks.
Thomson Reuters' data estimates a 34% jump in equity underwriting
fees for the industry as a whole compared to Q4 2012 and a 65%
increase sequentially - making this one of the most profitable
quarter for the banks' equity underwriting desks in three years. In
this article, we detail the equity capital market performance of
the country's five largest investment banks in Q4 and also estimate
the change in each of their fee revenues compared to Q3.
See the full Trefis analysis for Goldman Sachs |
| Morgan Stanley | Bank of America
The table below summarizes the performance of the equity
underwriting unit at each of the five largest U.S. investment banks
based on data released by Thomson Reuters last week. Notably, these
banks occupied the top five spots in global rankings in terms of
deal size - a recurring trend over the years.
Avg. Deal Size
|Bank of America
Goldman Sachs reclaimed the top spot in terms of market share by
deal size after being pushed to second place by JPMorgan in Q3. The
bank topped the list of book-runners in the U.S., Europe as well as
Asia to achieve a commanding 11.9% share for Q4. Goldman also has a
substantially larger average deal size than any of its competitors
- indicating that the bank played a role in most of the
largest equity underwriting deals over the quarter.
With an 8.2% market share, Morgan Stanley came in second with a
total deal size which was roughly 30% lower than Goldman. However,
the investment bank had a role to play in more deals this quarter
(145) than any other bank. This achievement went to JPMorgan more
often than not over recent years, as the diversified banking group
ranked #1 in this regard for 5 of the last 8 quarters.
Goldman's role in a bulk of the equity deals for the quarter,
including the biggest ones, also helped it amass more fee revenues
than the other banks with imputed fees of well over half a billion
dollars. That's more than double the $276 million in equity
underwriting fees the investment bank pocketed in Q3 (see
Q3 2013 U.S. Investment Banking Round-Up: Equity Underwriting
). The last time Goldman made more than $500 million in fees was in
Q4 2010 ($555 million).
As can be seen from the table, all the banks are expected to
earn at least 30% more fee revenues than they did in Q3. It should
be noted here that imputed fees are merely an estimate based on
historical data about banks' fees for a particular role in the
equity underwriting process, and the numbers the banks actually
report would differ from these figures. But these numbers do give a
good indication of what to expect. What remains to be seen is what
numbers the banks actually come up once the earnings season gets
underway next week.
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