For the second time in 17 years, global investment banking fees topped USD$100 billion. While that's great, there's more to this picture.
This year is set to top USD$100 billion in global investment banking fees for only the second time since Thomson Reuters Advisory and Investment Management’s fee records began in 2000. Broad-based gains in fees from equity capital markets products are having a big impact on this trend.
To dig a little deeper into the market trends, I recently interviewed two International Financing Review Editors – Stephen Lacey, U.S. Editor of IFR, and Anthony Hughes, Associate Editor of IFR – in a one-hour webcast .
It’s well worth a listen, but here are my main takeaways.
About that USD$100 billion
It was a bumper fee year, fairly evenly split across all the main products – mergers & acquisitions, equity and debt capital markets, and syndicated lending.
The Americas and Europe continue to provide the vast majority of fee income. Overall, it looks like a fairly steady picture whichever part of the market you operate in.
Encouragingly, we saw a resurgence in U.S. equity capital market activity following a steady fall during 2013-2016, bouncing 39 percent in 2017. That includes a 75 percent increase in fees for convertible bonds and a 90 percent increase in initial public offering (IPO) fees. Overall IPO proceeds in the U.S. are at a three-year high of USD$36 billion.
Not a golden year for IPOs
The start of the year saw some heavy IPO activity from the energy and industrials sector, the latter buoyed by the U.S. presidential election, which provided comfort to investors around leverage levels.
However, it hasn’t been an IPO bonanza by any measure, particularly in contrast to the strong performance of the Standard & Poor’s index, up around 15 percent.
To understand why, we dug into sectors. Take a look at this.
First, a caveat: The 2017 red bar includes some Chinese IPOs that could have been classified as tech IPOs, but even so, it has been a big year for Consumer & Retail.
It’s also worth distinguishing biotech from broader healthcare, where there has been a phenomenal boom in new, sometimes speculative listings in recent years. But in 2017, we saw healthcare’s share of new issuances fall from 19 percent to just 8 percent.
Tech IPOs accounted for 21 percent of all IPOs, despite the trend of innovative companies staying private for longer, resulting in a slowdown of such offerings. It’s also worth noting that while tech can be synonymous with big internet and social media companies, the lion’s share of activity has actually been in software businesses, with valuations based on real revenues and visible revenue growth, all backed by the cloud computing meta-trend.
We will continue this conversation in a second post.
International Financing Review Editor Stephen Lacey and Associate Editor Anthony Hughes expand on their observations in this one-hour webcast .