Investment Banking Fees Slump to Lehman Lows Amid Euro Crisis
December 21, 2011, 2:18 AM ESTBy Liam Vaughan and Elisa Martinuzzi
Dec. 20 (Bloomberg) -- Investment banks’ fees are on course to match the levels of 2008, when Lehman Brothers Holdings Inc. collapsed, after Europe’s sovereign-debt crisis roiled global markets and companies shelved deal plans.
The global investment banking fee pool, which comprises payments to banks for mergers and acquisitions advice, loans and underwriting debt and equity sales, may post the worst quarter since 2004 and stood at $78.6 billion year-to-date as of Dec. 19, according to New York-based research firm Freeman & Co. That’s 9 percent less than the $86.4 billion earned in 2011 and little more than the $78.5 billion earned in 2008.
“Fee generation over the past few months has been muted and the outlook for next year will be hugely impacted by a resolution of the euro-zone issue,” said Patrick Meier, head of European investment banking at RBC Capital Markets in London. “If that happens, I would expect financing markets to return to some semblance of normality, although it may take time to get back to the fervor of recent years.”
Investment banks have struggled to recover since the banking crisis of 2008 morphed into a sovereign debt crisis last year. Their corporate clients have opted to preserve cash rather than spend it on acquisitions, while volatile markets have made it difficult for companies to sell shares and bonds.
Global fee income had increased every year from 2002’s $49.6 billion in 2002 through the 2007 peak of $114.6 billion, according to Freeman & Co.
Fees from the Americas were $42 billion as of Dec. 19, about 5.6 percent less than last year’s level. The Asia-Pacific region yielded fees of $15.9 billion, 20 percent less than the previous year. Fees from Europe, the Middle East and Africa stood at $20.7 billion on Dec. 19, or 7 percent short of the full-year number for 2010.
“The missing ingredient is confidence, both on the part of investors and corporates themselves,” Meier at RBC Capital Markets said. “There is increasing concern that events in the market will feed through to the real economy.”
--Editors: Keith Campbell, Steve Bailey.
To contact the reporters on this story: Liam Vaughan in London at lvaughan6@bloomberg.net; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net
To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net
