Banking on the fees: Deal disappointments top off downward year for payouts
Bankers have been left with a sour taste in their mouths after two of the year’s blockbuster listings look set to deliver a disappointing round of payouts.
Hopes of a fee bonanza from Saudi Aramco’s flotation have fallen flat after it emerged that some of Wall Street’s biggest banks have been sidelined in the process, while filings show that banks will also receive just a slither of reward for Alibaba’s $11.2bn share sale.
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The double-whammy of disappointments top off a tough 12 months for equity capital markets, which have endured a slowdown in activity as geopolitical uncertainty bites.
“Goldman Sachs, Credit Suisse and Deutsche Bank have each seen double-digit declines in fees from last year, a fact that will surely affect bankers’ wallets come bonus time,” said Lucille Jones, a deals analyst at Refinitv.
Banks which underwrote Alibaba’s listing are in line for $28.1m, representing just 0.25 per cent of the deal value and marking the lowest fee in percentage terms paid to banks out of the 10 largest listings in Hong Kong, according to data compiled by Bloomberg.
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Meanwhile, Saudi Aramco’s eagerly-awaited float has resulted in the likes of JPMorgan Chase and Morgan Stanley being marginalised as global co-ordinators, with the oil giant turning to local lenders.
Aramco is set to smash the record for the highest number of banks working on a single IPO in 2019, having hired 25 bookrunners for its upcoming float.
“The fee wallet is definitely down for the year,” one head of equities at a major global bank told City PM
“But as we go into the next year, assuming we have a calm backdrop, then I think there’s a good pipeline that will want to come through.”
Jones added: “A regional view of IPO fees show that fees in Europe have fallen furthest, down 48 per cent to less than half the value seen at this time last year.
“The fall in IPO fees is in line with the fall in IPO volumes in Europe, down 47 per cent from last year to $21.9bn, the lowest level since 2012.”
Wework decided to abandon its highly-anticipated float in September, adding to a downbeat sentiment in the market after several underwhelming listings such as Uber and Lyft.