International Financing Review Asia April 4 2020 13For daily news stories
visit http://www.ifre.comAsian IB fees fall in first quarter
Investment Banking Coronavirus halts activity as quarter wears onBY THOMAS BLOTTAsian investment banking fees
fell during the first quarter with
most asset classes experiencing
declines as dealmaking took a
major hit from the coronavirus
pandemic following a frantic
start to the year.
Overall investment banking
fees for the first three months
in Asia Pacific ex-Japan stood
at US$4.96bn, down 9% year
on year, according to Refinitiv
data.
The drop-off in activity
occurred after the Lunar New
Year holiday as the spread
of the virus rocked financial
markets across the region.
Investment banking fees in
January came in at US$2.16bn,
accounting for almost half of
the quarterly total and up by a
fifth on the previous year.“You can split the quarter
into two halves,” said Gaetano
Bassolino, head of global
banking for Asia Pacific at UBS.
“We saw very strong activity
across all products in January,
which was partly fuelled by the
fact that Chinese New Year was
early this year.
“After Chinese New Year,activity in China slowed but
this was out of sync with the
rest of Asia, and indeed the rest
of the world. Stock markets
were still hitting record highs
globally. It was only towards
the end of February that the
picture changed.”
Despite China being
the epicentre of the initial
outbreak, investment banking
activity in the country during
Q1 held up reasonably well
with overall fees coming in at
US$3.49bn against US$3.55bn
a year ago thanks to several
big A-share IPOs and a
resurgence in domestic debt
deals following monetary and
fiscal easing in response to the
epidemic.
This was reflected in the
investment banking fee league
tables with Chinese banks and
brokerage firms taking seven of
the top 10 positions, including
four out of the top five.
CITIC, which includes China
Citic Bank, Citic Securities
and CLSA, took the top spot,
jumping three places from
a year earlier, generating
US$261.39m for a 5.3% share
of wallet. This was largely due
to a strong spate of equity and
equity-linked deals.
BANK OF CHINA, which ranked
first last year and often
dominates the Asia Pacific
league tables on the back ofits strong syndicated lending
business, was second with a
4.8% market share.
CREDIT SUISSE, the top ranked
international bank, was third
with a 3.9% wallet share,
moving up 12 places following
a strong quarter in high-
yield debt and equity capital
markets, where it finishedsecond in terms of fees.
MORGAN STANLEY, which ranked
sixth, and HSBC, which ranked
10th, were the only other
international banks in the top
10.MARKETS REBOUND
Debt underwriting accounted
for more than half the
regional fee pool, coming in at
US$2.78bn, although this was
still down 5% year on year.
There were no public
offerings of Asian US dollar
bonds from March 12-30 with
the exception of a few club
deals from Chinese property
developers as the offshore bond
markets ground to a halt amid
the coronavirus pandemic.
Several bankers, however,
pointed to the recent AIA
Group and Baidu trades, both
anchored by US investors, as
evidence that the US dollar
bond markets were reopening
to high-quality, investment-
grade Asian issuers.
“With the recent monetary
and fiscal stimulus, things
are now looking a bit more
stable and we should see more
investment grade issuers come
to the market,” said Terence
Chia, head of Asia Pacific debt
syndicate at Credit Suisse.
“If those deals go well then
we would expect to see more
high-quality, high-yield namesreturn, although that also
depends on where secondary
market trading levels are. For
the credits that are trading in
double digits, it will likely be
more difficult for them.”
Meanwhile, fees from equity
and equity-linked deals rose by
almost a quarter to US$1.14bn,
which was mostly a reflection
of higher volumes in China and
also thefact that this was set
against a particularly poor Q
last year following a downturn
in activity beginning in the
second half of 2018.
Bankers in Hong Kong were
more circumspect about the
impact of the coronavirus on
deal flow and said they do not
expect to see much activity
until the second half with the
exception of some convertible
bonds and opportunistic block
trades.
“I think generally speaking
we will see the markets reopen
at different times over the
course of the year, although for
equities, it will most likely take
longer until that first window
appears,” said Jan Metzger,
Asia Pacific head of banking,
capital markets and advisory at
Citigroup.
“A lot of it will be sector-
driven anyway, for example
medical or e-commerce
companies will have an easier
time accessing the capital
markets than others at the
moment.”
Fees from loans fell by
almost a third to US$560.8m
as the impact of lockdowns
and containment measures
prompted most borrowers
to turn their attention to
amending existing lending
facilities rather than raising
fresh funds.
Fees from M&A advisory
almost halved to US$473.1m
as both financial sponsors and
strategic investors shelved
investment plans with some
even triggering material
adverse change clauses to back
out of deals. Asia Pacific Investment Banking Fees
(ex-Japan)
1/1/20 – 31/3/
Name Values fees (US$m) %
1 Morgan Stanley 74.50 15.
2 Citic 39.54 8.
3 Credit Suisse 27.85 5.
4 ICBC 22.70 4.
5 PwC 21.68 4.
6 CICC 16.26 3.
7 Somerley 13.46 2.
8 Macquarie 13.03 2.
9 JP Morgan 12.45 2.
10 China Merchants Sec 10.66 2.
11 Moelis 10.36 2.
12 UBS 10.29 2.
13 Ernst & Young 9.78 2.
14 China Great Wall Sec 8.76 1.
15 Guosen Sec 8.37 1.
16 Huatai Sec 8.01 1.
17 Goldman Sachs 8.00 1.
18 Gram Capital 7.00 1.
19 Lazard 6.98 1.
20 Ambit Capital 6.76 1.
21 Citigroup 6.42 1.
22 Discover Management 6.02 1.
23 Valence Group 4.83 1.
24 TD Sec 4.70 0.
25 Covington Associates 4.46 0.
Grand Total 362.87 76.
Total 473.09 100.Source: Refinitiv data“I think generally speaking we will see the
markets reopen at different times over the course
of the year, although for equities, it will most
likely take longer until that first window appears.”B 1 HZVLQGG