Asia IB Q2 fees hit three-year low
DCM accounts for half of overall fees during tough quarter
Asian investment banking continued its
moribund start to the year with the worst
second quarter for three years as activity
fell across all asset classes bar debt capital
markets.
Overall investment banking fees for the
!PRIL
*UNEûQUARTERûINû!SIAû0ACIlCûEX
*APANû
STOODûATû53BN ûACCORDINGûTOû2ElNITIVû
data, 7% lower than a year ago and down 5%
ONûANûALREADYûDISAPPOINTINGûlRSTûQUARTER
Bankers were hopeful of a recovery
during Q2 following a downturn in activity
that began during the second half of last
year, as US-China trade tensions eased in
April and share prices rallied.
That optimism proved unfounded with
trade frictions worsening as the quarter
wore on, leading to a dearth of sizeable,
strategic deals and DCM again accounting
for the lion’s share of fees.
h)TSûDElNITELYûBEENûAûSUBDUEDûSECONDû
quarter, particularly for ECM and M&A,
although I think that’s partly because of
the comparison with last year, which was
very buoyant,” said one head of investment
banking at a European bank.
“If you compare it with the second half
of last year, the situation is a lot more
favourable and in ECM, we are starting to
see investors re-engage more as share prices
HAVEûPICKEDûUP ûSOû)ûEXPECTûAûBETTERûENDûTOû
the year.”
/VERALLûFEESûFORûTHEûlRSTûSIXûMONTHSûOFû
the year dipped 2% to US$10.35bn with
fees from ECM, M&A advisory and loans
all posting double-digit declines, offsetting
a rise of more than a third in DCM fees to
US$5.18bn.
Chinese banks regained some of the
ground they lost on their international
RIVALSûINûTHEûRANKINGSûLASTûYEAR ûTAKINGûSIXû
of the top 10 league table positions for
INVESTMENTûBANKINGûFEESûFORûTHEûlRSTûSIXû
months, up from four a year earlier.
BANK OF CHINA, which typically dominates
the league tables on the back of its strong
syndicated lending business, kept its
top slot, generating US$591m in fees,
equivalent to a 5.7% share of wallet.
CITIC, which includes China Citic Bank,
Citic Securities and CLSA, also retained
second place with a 4.7% wallet share,
while INDUSTRIAL AND COMMERCIAL BANK OF CHINA
was up two places to third.
GOLDMAN SACHS suffered the biggestdrop among last year’s top 10, falling
EIGHTûPLACESûTOûTHûHAVINGûBENElTEDû
the previous year from a strong showing
in ECM, particularly in equity-linked
underwriting.
UBSûRANKEDûlRSTûTHISûYEARûAMONGûTHEû
international banks, up three places to
fourth, followed by HSBC, up four places to
lFTHûCREDIT SUISSE and CITIGROUP were the
only other international banks among the
top 10.DCM DOMINATES
DCM has accounted for the biggest
component of Asian investment
banking revenues in recent years, and
its importance to banks’ bottom lines
during Q2 was even greater than usual,
contributing to half of overall fees.
Overall DCM fees during Q2 stood at
US$2.49bn, an increase of 13% year on year,
due to a rise in activity thanks to a more
dovish US Federal Reserve and improved
investor sentiment towards emerging
markets. As things stand, issuance is even
on track to beat 2017’s record total.
High-yield issuance continued apace
following a surge in offshore China deals,
especially from the property sector and
local government funding vehicles, many of
which had to use up their offshore quotas
BEFOREûTHEYûEXPIREDûINû*UNE
“Around 30% of the issuance last year
was sub-investment grade. I think this year
ITSûOVERûûANDûINûFACTûFORûTHEûlRSTûQUARTERû
or so, it was close to half,” said Derek
Armstrong, head of debt capital markets for
APAC at Credit Suisse.
“Several issuers that looked at the
market last year and were put off by the
high borrowing costs have now come to
market, especially in the Chinese real
estate sector.”
ECM activity rebounded during Q
following an especially poor Q1, although
overall fees at US$1.29bn were still down
slightly from US$1.32bn in the same period
last year.
Bankers pointed to the drop-off in
IPO activity, particularly from Chinese
tech companies, as the main reason for
the subdued performance, although are
OPTIMISTICûABOUTûTHEûNEXTûSIXûMONTHSûASû
investor sentiment has improved.
“ECM has been a bit slower this year. Ithink that’s primarily because of the post-
IPO performance of a number of issuers last
year, particularly in the TMT sector,” said
John Lee, head of Greater China at UBS.
“But I suspect IPO volumes will pick up
during the second half. A number of TMT
issuers have started to perform better lately
as well so we could see more activity in
the sector again, either primary deals or
follow-on offerings.”
M&A fees in Q2 fell more than a third
to US$571m as Chinese outbound activity
continued to slow, although this was partly
compensated by an upturn in domestic
China deals, according to bankers.
Fees from loans fell by almost half to
US$683m, the worst quarterly performance
in more than four years in terms of fees,
as US-China trade tensions and slowing
economic growth weighed on borrower
demand.
THOMAS BLOTTTOP STORY FEES LEAGUE TABLESPlease send job moves to
[email protected]First Half 2019 IB Fee League Table
ASIA PACIFIC (EX-JAPAN)
Name Values fees (US$m) %
1 Bank of China 590.52 5.
2 Citic 488.88 4.
3 ICBC 400.88 3.
4 UBS 317.16 3.
5 HSBC 301.93 2.
6 BoCom 298.70 2.
7 Credit Suisse 296.65 2.
8 Citigroup 264.37 2.
9 CICC 257.21 2.
10 ABC 257.06 2.
11 Goldman Sachs 253.05 2.
12 CCB 252.60 2.
13 Morgan Stanley 242.16 2.
14 JP Morgan 216.56 2.
15 Haitong Sec 202.42 1.
16 Guotai Junan Sec 178.33 1.
17 CSC Financial 150.06 1.
18 Deutsche 143.77 1.
19 China Merchants Bank 140.97 1.
20 DBS Group 121.45 1.
21 Industrial Bank 118.10 1.
22 Standard Chartered 116.29 1.
23 BAML 115.37 1.
24 Huatai Sec 113.56 1.
25 China Minsheng 106.09 1.
Grand Total 5,944.16 57.
Total 10,354.07 100.
Source: Refinitiv dataPeople