Bloomberg News

Global Investment Bank Fees Fall for Third Consecutive Quarter

April 03, 2012

April 3 (Bloomberg) --Investment banking fees posted their third consecutive quarterly decline in the first quarter, the longest contraction since 2008, as the biggest sovereign debt restructuring in history crimped dealmaking worldwide.

Revenue from arranging mergers, stock and bond sales and loans fell 14 percent to $19.39 billion in the first quarter of 2012 from $22.43 billion a year earlier, according to estimates from New York-based research firm Freeman & Co. The shrinkage was exacerbated by a 19 percent fall in first-quarter fees in Europe, the Middle East and Africa to $4.91 billion, the lowest since the same period in 2004.

“We should have seen the lows in the first quarter,” Stefan Bongardt, a banking analyst at Independent Research in Frankfurt, said today by phone. “Sentiment in Europe has improved and a pipeline is picking up, indicating that fees should pick up by the third and fourth quarter.”

Concern that Greece would default on its debt roiled credit markets and deterred company executives from acquisitions, curbing earnings at securities firms. At Deutsche Bank AG (DBK), Germany’s biggest financial-services firm, fourth-quarter profit fell 76 percent as its investment bank posted a 422 million-euro pretax loss ($563 million). Fourth-quarter profit at UBS AG (UBSN), Switzerland’s largest bank, also dropped 76 percent as its investment bank recorded a pretax loss of 256 million Swiss francs ($284 million).

Companies in Europe, the Middle East and Africa slowed dealmaking, according to the Freeman estimates. Fees from mergers and acquisitions fell 35 percent to $1.57 billion in the first quarter of 2012 from a year earlier. Income from syndicated loans declined 30 percent to $748 million.

The biggest announced transaction in Europe in the first quarter was Glencore International Plc’s 22 billion-pound ($35 billion) bid for Xstrata Plc (XTA) in February, according to data compiled by Bloomberg.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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