Advisory And Underwriting Fees For Largest U.S. Banks Reached Record High In Q2

NEW YORK, NY – AUGUST 01: People exit the New York Stock Exchange building along Wall Street on August 1, 2018 in New York City. (Photo by Stephanie Keith/Getty Images)

The five largest U.S investment banks reported nearly $8.8 billion in total investment banking fees for Q2 2018 – a figure that includes their M&A advisory, equity underwriting and debt origination fees for the second quarter of the year. This marks an increase of 8% compared to the $8.2 billion earned a year ago, and a sharp jump of 16% from the $7.6 billion figure for the previous quarter. While Q1 2018 was a weak period for M&A advisory and debt origination activity globally, there was a significant increase in activity across the M&A industry, equity capital markets as well as debt capital markets in Q2. Notably, the figure for Q2 2018 was the highest in history for these five banks (with the previous high being $8.57 billion in Q4 2009), and compares to an average figure of just $7.3 billion over the last 20 quarters.

We capture the trends in these fees in recent years in our interactive dashboards – an overview of M&A advisory fees, an overview of equity underwriting fees as well as debt origination fees – while also forecasting how these revenues are likely to change in 2018. We highlight key observations related to their total advisory & underwriting fees below.

Total investment banking fees for the industry are taken from Thomson Reuters’ latest investment banking league tables, and includes fees from M&A advisory, equity underwriting, debt origination and loan syndication activities.

Trends In Fees

The table below details the trend in total investment banking fees for each of these banks in the last five quarters. The green-to-yellow shading along a column highlights the relative performance of each bank in any given quarter. Notably, these banks usually capture around 33% of the global investment banking wallet share for any given quarter. However, their wallet share fell from over 35% in Q1 2017 to just 29% in Q4 2017 due to a jump in capital markets deals in developing countries (China in particular), where local players enjoy a larger market share. A notable improvement in market conditions in U.S. has helped their market share recover to 32-33% over recent quarters, though.

JPMorgan regained the top spot in terms of total advisory & underwriting fees from Goldman this time around. JPMorgan has largely dominated the #1 position since the economic downturn (with the bank figuring at the top of the list for the five-quarter period from Q3 2016 to Q3 2017) due to its extremely strong presence in U.S. debt industry. As debt origination fees normally make up roughly 50% of total investment banking fees for these U.S. banks (with M&A advisory fees contributing ~30% and the remaining 20% coming from equity underwriting fees), a strong performance in the debt capital markets has a visible impact on a bank’s standing in this list.

Notably, Goldman fared much better than its peers in Q4 2017 as well as Q1 2018, primarily due to unusually high debt origination fees, which augmented its industry-leading M&A advisory fees to help it secure the top spot. Although the investment bank’s debt origination fees normalized in Q2, it still maintains a strong lead over other investment banks.

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