Banks Pocket Healthy Underwriting Fees As Global Equity Market Remains Upbeat

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The global equity market saw a flurry of activity over the first quarter of the year, with companies around the world raising nearly $190 billion through IPOs and follow-on offerings over the period. Quarterly data compiled by Thomson Reuters Thomson Reuters shows that equity underwriting deals were at similar levels to what was witnessed for the same period last year. While the total deal size is almost 30% lower than the $264.4 billion figure for the previous quarter, it must be remembered that the Q4 2013 results were exaggerated by a surge in equity offerings after the Fed's initial announcements of a tapering plan resulted in a weak Q3 2013 performance.

Continued optimism among companies and investors translated into higher equity underwriting fees for investment banks. Thomson Reuters' data estimates a 27% jump in equity underwriting fees for the industry as a whole compared to Q1 2013, although a 21% decline is expected sequentially. In this article, we detail the equity capital market performance of the country's five largest investment banks in Q1 2014, and also estimate the change in each of their fee revenues compared to Q1 and Q4 2013.

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The table below summarizes the performance of the equity underwriting unit at each of the five largest U.S. investment banks based on data released by Thomson Reuters last week.

Goldman Sachs retained the top spot in terms of market share by deal size – a position it has maintained in six of the last seven quarters. The bank topped the list of book-runners in EMEA and Asia to achieve a commanding 10.6% share for Q4. Goldman also has a substantially larger average deal size than any of its competitors – indicating that the bank played a role in most of the largest equity underwriting deals over the quarter.

With an 8.4% market share, Morgan Stanley Morgan Stanley came in second with a total deal size which was 21% lower than Goldman, followed by JPMorgan with a 7.8% market share. In terms of number of deals, JPMorgan ranked highest among all investment banks for the quarter, with the banking group playing a role in more deals (116) than any other bank – a feat it has achieved in six of the last nine quarters.