Q3 investment banking fees at post-crisis low

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A broker watches screens in an office of the French investment company Aurel BGC in Paris on September 12, 2011
The Business Times

THE world's investment bankers took home less money over the past three months than in any quarter since the start of 2009, amid uncertainties surrounding quantitative easing and Syria.

Data by Thomson Reuters has it that third-quarter investment banking fees fell 24 per cent quarter-on-quarter to US$15.7 billion globally. This marks it as the worst quarter since the global financial crisis, when worldwide investment bankers earned just US$12 billion in fees in the first three months of 2009.

On a year-to-date basis, fees are still up 3 per cent year-on-year at US$56.8 billion, reflecting a strong first half of the year for fund-raising and deal-making.

The Asia-Pacific, excluding Japan, recorded the sharpest drop in fees among the regions; its year-to-date fees were down 8.2 per cent to US$6.6 billion, compared to the year-ago period.

But performance within the region was diverse. Australian fees fell 20.2 per cent to US$1.3 billion. In Hong Kong, fees rose by 29.9 per cent to US$625 million; in Singapore, they rose by 24.3 per cent to US$373 million.

As a region, the Americas saw the sharpest uptick, gaining 6.7 per cent to US$32.5 billion in the first nine months.

Financials, energy and power and industrials accounted for 54 per cent of global total fees during the first nine months, but strong year-on-year growth came in the telecommunications, real estate and media and entertainment sectors.

From a product perspective, debt deals accounted for 31 per cent, or US$17.5 billion, of overall fees. Equity capital markets contributed US$13.7 billion year-to-date, while mergers and acquisitions advisory accounted for US$12.6 billion.

Despite the weak quarter, banks are generally careful about making knee-jerk personnel decisions, said OCBC head of group investment banking Gan Kok Kim.

"Investment banking is a field that requires specialist know-how and experience," he said. "The expectation is for banks to continue to hire individuals with the right skill sets, in tandem with business growth in Singapore and the region."

Capital remains liquid in Asia despite recent choppiness, but markets and dealmakers continue to keep a close eye on volatility, Mr Gan said.

"The near-term prospects will be affected by market conditions as the Fed forward guidance is factored in and volatility in the capital flows will be consideration for the capital markets," he said.


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