J.P. Morgan Chase & Co. (JPM) led the world’s banks in the business of underwriting and selling a company’s stock.
In 2009, the bank earned an estimated $2.2 billion in fees in equity capital market (ECM) underwriting, nearly double its earnings from the year before. ECM underwriting has become a main driver of fees.
Led by Asian initial public offerings (IPOs), global ECM activity increased by 25% to $866 billion driven by resurgent stock markets, and the need for companies to raise cash after last year’s market plunge.
Bank of America Corp (BAC) surprised some analysts by rebounding from the turmoil surrounding it to earn the No. 2 spot on the global ECM rankings with 298 deals worth $72.4 billion. a surprising bump up from No. 4, given the turmoil that hit the bank beginning late last year.
The third slot went to Goldman Sachs Group (GS) with 251 deals worth $71.3 billion.
Hong Kong was by far the world’s most active stock market for IPOs, surpassing exchanges in New York and Europe.
Carve-out IPOs did particularly well this year, said Bank of America Merrill Lynch Global Head of Equity Capital Markets Lisa Carnoy.
“In general, investors made a lot of money on carve-outs because they’re mature, proven companies,” she said.
Carnoysaid investors are still cautious, but she expects the market to improve further in 2010, and added there could be more health care and tech IPOs.
“We still have sectors that have been relatively quiet, including growth sectors like health care and tech, which are usually the lion’s share of IPO market,” she said.
As further evidence of its leadership in this lucrative business, J.P. Morganalso retained its place this year as the top underwriter of U.S. corporate bonds, leading banks managing a record $1.24 trillion of fixed-income offerings as borrowers take advantage of the lowest rates in almost five years.
The New York-based bank, the second-largest U.S. lender by assets, underwrote 13.5 percent of investment-grade new issues with 508 transactions worth $115.3 billion, followed again by Bank of America Merrill Lynch (BOA), which had 12.8 percent and moved into second place, displacing Citigroup Inc., with 11.5 percent, according to data compiled by Bloomberg. Including self-led sales, Citigroup was the top underwriter with 15.6 percent.
Issuers such as Pfizer Inc., the world’s biggest drug maker, tapped the U.S. credit market as bond buyers poured cash into fixed-income assets. Borrowers raised money at ever-lower rates as the economy stabilized following the worst financial crisis since the Great Depression.
“We’ve had a pretty banner year as far as new issuance goes,” said Rajeev Sharma, who helps oversee about $1.4 billion of investment-grade bonds as a portfolio manager at First Investors Management in New York. “I would think that January is going to pick up again.”
J.P. Morgan was the top underwriter of high-yield, high-risk bond issuance for the fourth straight year, Bloomberg data show. Not including self-led transactions, the lender underwrote $25.8 billion of bonds, or 16.1 percent with 164 issues, followed by Bank of America Merrill Lynch with $25.79 billion of offerings in 183 sales, Bloomberg data show.
While record debt sales by the government led to a 3.58 percent loss for Treasuries this year, optimism that a recovering economy will make it easier for companies to meet debt payments spurred a 26 percent average return for corporate bonds, including reinvested interest, according to Merrill Lynch indexes. Corporates lost 10.9 percent in 2008 while Treasuries gained 14 percent.
“There’s been a lot of demand for corporate bonds because people are moving out of a money market that pays almost nothing and into higher-yielding corporate bond funds,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey.
