Bond fees up as Asia G3 bond volume soars to new record
IB fees totaled US$19.80 billion in 2019, representing an increase of 13.9% from a year ago, with bond fees accounting for a little over half of the amount at US$10.06 billion
9 Jan 2020 | Chito Santiago

BANKS and other financial institutions generated higher investment banking fees in Asia, outside of Japan and Australasia, in 2019, largely driven by the robust issuance activity in the bond market.

Figures supplied by Refinitiv show that investment banking fees totaled US$19.80 billion in 2019, representing an increase of 13.9% from US$17.39 billion a year ago.

Underpinned by bigger transaction volume in 2019, bond fees accounted for a little over half of the amount at US$10.06 billion, compared with US$7.01 billion in 2018. As expected, the issuance of G3 bonds in the region reached a new record high at US$349.47 billion in 2019, exceeding the previous record volume of US$333.27 billion in 2017 and represented an increase of 28.2% from US$272.69 billion in 2018.

Undoubtedly, the robust issuance activity in the high yield bond sector helped drive the bond fee higher. Total high yield bond volume out of Asia, outside of Japan and Australasia, in 2019 amounted to US$82.32 billion, or up 83.2% from the previous year’s amount of US$44.94 billion.

Illustrating how they have asserted themselves in deal-making in the region, spurred by China-related transactions, the Chinese banks and securities companies have the highest share of wallet on bond fees in 2019, occupying the top nine slots out of 10 in the league table.

Bank of China (BoC) earned the highest bond fee in 2019 with US$677.1 million for a 6.7% share of wallet – up from US$423.3 million it generated a year ago. It was followed by Industrial and Commercial Bank of China (ICBC) with US$509.9 million (5.1%) and CITIC with US$506.5 million (5%). Only HSBC managed to barge into the top 10 with total fee of US$245 million (2.4%)

Fees from equity transactions were also higher in 2019 at US$4.51 billion, according to Refinitiv, compared with US$4.34 billion in 2018, despite the decline in IPO volume. Total IPOs in 2019 amounted to US$66.14 billion, down from US$75.90 billion in the previous year. This was offset, though, by the strong recovery in convertible bond issuance, which amounted to US$54.29 billion, against US$29.94 billion in 2018. Follow-on offering also exhibited an uptrend during the same period, rising from US$93.90 billion to US$95.91 billion in 2019.

Two Chinese investment banks topped the equity fee league table for having the highest share of wallet in 2019, with CITIC earning US$330.4 million (7.3%), followed by China International Capital Corporation (CICC) with US$236.3 million (5.2%).

But Wall Street banks managed to hold their own, with five of them barging into the top 10 slots. Morgan Stanley was actually in third spot after CICC with US$223.1 million (5%), followed by Goldman Sachs with US$215.5 million (4.8%). Other Wall Street banks in the list were Credit Suisse, Citi and J.P. Morgan.

Loan fees were also down in 2019 at US$3.03 billion, against US$3.38 billion in 2018 – a reflection of the lower syndicated loan volume during the past year. According to Refinitiv, the total amount fell 4.2% to a two-year low of US$464.2 billion in 2019 on the back of limited credit demand stemming from a slowdown in economic activity in the region due to the ongoing trade tensions between the US and China.

BoC earned the highest loan fees in 2019 with US$485.1 million for a 16% share of wallet. The amount, though, was barely half of the US$953.4 million it generated in 2018, and this largely pulled down the industry fee total for the year. HSBC was the next biggest loan fee earner with US$213.4 million (7%), followed by Bank of Communications with US$184.8 million (6.1%) and Agricultural Bank of China with US$127.1 million (4.2%).

The other non-Chinese banks in the top 10 league table generated bigger loan fees in 2019, compared with the previous year, including Standard Chartered with US$106.3 million, DBS Group US$102.5 million, State Bank of India US$100.4 million and United Overseas Bank US$77.7 million.

Fees from mergers and acquisitions likewise fell to US$2.21 billion in 2019 from the previous year’s US$2.65 billion as the deal flow was impacted by the US-China trade tensions and the slowing Chinese economy. While ICBC and CITIC were the leading M&A fee earners during the year with US$161.8 million and US$132.7 million, respectively, the foreign banks and other institutions including Citi, Morgan Stanley, Goldman Sachs, J.P. Morgan, PricewaterhouseCoopers and HSBC barged into the top 10 league table in 2019.