Mumbai: Indian banks have outperformed foreign competitors on home turf in the first five months of 2008, even as the subprime mortgage crisis that rocked the financial world last year continues to have an impact on the mergers and acquisitions (M&A) business, reducing deal flows globally.

According to the league tables for Indian markets compiled by Thomson Reuters, three domestic banks—State Bank of India (SBI), ICICI Bank Ltd and Kotak Mahindra Bank Ltd—claim the top ranks this year. Their fee income has risen significantly even as that of the foreign banks has seen a big drop.

See: Fee snapshot

While the foreign banks’ fee fell by at least 61%, the three domestic banks witnessed a 110% growth in average fee income from investment banking operations such as advisory services for M&As, equity and debt capital market operations and syndicated loans.

SBI topped the league table, even though it wasn’t the adviser to any M&A deal, mainly because of income from loan operations.

SBI’s overall investment banking fee income rose an astounding 264.2% to $28.2 million (Rs120.7 crore) during the first five months of this year compared with $7.7 million during the corresponding period in 2007.

Supratim Sarkar, senior vice-president, project advisory and structured finance at SBI, said the boom can be attributed to the capacity expansion cycle of the Indian infrastructure story, which is “selling like hot cake”.

ICICI Bank, ranked two on the table, saw fee income rise 54.5% to $14.2 million, while Kotak Mahindra Bank, ranked four, took home $11 million from investment banking.

Both ICICI Bank and Kotak Mahindra Bank earned most of their fee income from equity capital market, or ECM, operations—advising public floats and other equity transactions such as private placements.

ICICI Bank sourced 70% of its fee income from ECM advisory and at least 95% of Kotak Mahindra’s fee income came from ECM operations.

According to the head of ECM operations in one of these two banks, who did not wish to be named, the pipeline for initial public offers is bloated and firms are awaiting the sentiment in equity markets to change. The market is in a bear phase at this point with Sensex, Bombay Stock Exchange’s benchmark index, falling some 30% since the beginning of this year.

All seven foreign investment banks—Merrill Lynch, Citibank NA, Deutsche Bank AG, Standard Chartered Plc, Goldman Sachs and Co,HSBC Holdings Plc and Morgan Stanley—ranked among the Top 10 in the table, saw their fee incomes slump.

Goldman and Morgan were the worst hit, with fee income down 82.9% and 73.2%, respectively.

Interestingly, none of the domestic investment banks is in the top ten list in terms of M&A advisory. Merill tops the M&A league, and Morgan, Citi and Goldman follow.

Merrill ranked third overall, with fee income of $12.3 million this year. The firm earned 99% of this from M&A advisory. The Top 10 in the M&A league tables include NM Rothschild and Sons (India) Ltd, Credit Suisse, Ernst and Young Llp, BNP Paribas SA and Deutsche Bank AG.

Across Asia, investment banking fees dropped 12%. Swiss bank UBS AG tops the overall M&A league tables in the region.

China’s state-owned bank, China International Trust and Investment Co., leads in terms of fee income from ECM, while SBI tops the Asian league tables in terms of loan fee.