Although mergers and acquisitions have plunged in the third quarter, which has resulted in the decline in banking fees, one bright spot for JPMorgan Chase (NYSE:JPM) & Co has been the success in raising capital for debt and equity, which has led them to solid underwriting fee revenue for the third quarter.
Ahead of all other banks in the league tables, equity underwriting has generated $1.6 billion in fees, while debt underwriting has brought in another $1.1 billion for JPMorgan, in contrast to the entire first three quarters last year where they brought in debt underwriting fees of $1 billion and equity underwriting fees of $986 million.
For the overall industry in the quarter, overall fees have generated $8.9 billion in income for banks, a huge increase of 65 percent over last year in the same quarter. A lot of this has come about from investors embracing a little more risk as well as financing costs coming down through smaller credit spreads and lower interest rates.
Behind JPMorgan Chase in equity underwriting in the quarter was Morgan Stanley (NYSE:MS), which generated $967 million in fees, with Bank of (NYSE:BAC) coming in second behind JPMorgan in debt underwriting fees with $963 million.
While this is good news for financial institutions, it’s not clear that this will continue on, as supply is possibly on the decline because market conditions pulled the debt issuance forward for the quarter.
Everything that can generate revenue at this time for the industry is good news, but the underwriting of debt and equity won’t be able to compensate for the anemic Mergers & Acquisitions market which has almost completely dried up. It’s still a long way until things really turn around, in spite of the solid increase in fee generation from raising capital in debt and equity.
