Across the globe, investment banks generated a cumulative $124.5 billion in investment fees in 2020. According to the research data analyzed and published by Stock Apps, from this amount, the top five US banks accounted for a 30% share, translating to $37 billion. That is the highest share on record for the US giants since 2013.
The remarkable upsurge was attributed to an increase in the number of businesses raising capital during the year. Data reveals that 2020 was one of the best years for IPOs, second only to 2007.
Globally, businesses raised a total of $300 billion from public listings. Businesses in the US accounted for over half the amount, raising $159 billion.
Per FT, deal activity in the US soared by over 70% YoY, with the exclusion of SPAC listings. JP Morgan Chase, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup were at the center of this action.
For the first nine months of 2020, JP Morgan Chase was in the top spot, retaining its 2019 lead according to Refinitiv. Earning $6.8 billion in investment banking fees, it had a 7.5% market share.
Goldman Sachs ranked second with $5.9 billion and a 6.5% market share. In the third spot was Bank of America with $5.3 billion and a market share of 5.9%. Morgan Stanley and Citigroup had $4.9 billion and $4.5 billion, accounting for a 5.4% and 5.0% share respectively.
In terms of financial sponsor fees, JP Morgan once again took the lead, rising up one spot from 2019 to replace Goldman Sachs. It contributed $618.1 million, accounting for a 7.9% market share. Goldman Sachs, in second place, contributed $598.9 million, capturing a 7.7% market share.
Snowflakes’ $3.4 Billion IPO, Largest Ever for Software Industry
Debt and equity offerings by companies such as Airbnb and Boeing were among the top contributors to the record investment banking fees posted by US banks.
At the end of April 2020, Boeing raised a whopping $25 billion in a bond offering, its highest debt sale ever. At the beginning of December 2020, its debt totaled $61 billion. With its 737 MAX back in the air and the airline industry gradually recovering, it announced plans to sell shares to start repaying the debt.
For Airbnb, the pandemic’s ravages on tourism saw it raise $2 billion in debt and equity in April 2020 at a valuation of $18 billion. At the beginning of December 2020, it sold shares in an IPO at $68, at a $47 billion valuation. As at that time, the company had turned a $697 million net loss in 2020, on $2.52 billion revenue.
IPOs carried out by Snowflake and DoorDash were other noteworthy offerings that made the banks hefty fees.
DoorDash came to market in a $71.3 billion IPO in December 2020, one of the biggest in 2020. Snowflake, on the other hand, raised $3.4 billion in September 2020, at a $33 billion valuation. It went on record as the largest software IPO ever.
IPO Underwriting Fees Soar by 90% in 2020 to $13 Billion, Highest in Two Decades
Overall, 2020 saw companies raise more than $5 trillion in debt, a new high. According to FT, underwriters made fees surpassing $42.9 billion from debt offerings during the year. IPO underwriting fees soared by 90% to reach $13 billion, the highest figure in 20 years.
Notably though, there was a decline in merge and acquisition (M&A) activity during H1 2020. This resulted in a 16% YoY decline in completed M&A advisory fees for the first nine months of 2020. At $19.8 billion, it was the weakest period since 2014.
According to data published by Refinitiv, global investment banking fees in the first nine months of 2020 reached a high of $91.2 billion. Compared to a similar period in 2019, this marked an increase of 14% YoY.
In September 2020 alone, investment banking fees globally rose by 11% YoY to reach $11.4 billion. The month went on record as the fourth highest ever for investment banking fees.
The United States took the lead globally for the nine-month period, contributing 51% of all fees worldwide, at $46.5 billion. In comparison to the first nine months of 2019, that was an 18% uptick.
It is interesting to note that the financial sector was a leading source of investment banking fees during the first nine months of 2020. Per Refinitiv data, it generated $25.4 billion, accounting for 28% of the global total and recording a 5% uptick from the year ago period.
In the second spot was the industrials sector, which generated $10.0 billion, an uptick of 31% from 2019. The tech sector came in third with $8.2 billion, marking a 23% increase YoY.