Investment banking revenue falls 11% to $440 million in 2016
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Mumbai: Investment banks in 2016 collectively earned $440 million in fees, 11% less than the $495 million they garnered the previous year, Dealogic data showed.
Over the past six years, the peak was $868 million in 2011.
Foreign investment banks dominated dealmaking in 2016, with only three local banks—State Bank of India, Axis Bank and ICICI Bank Ltd—making it to the list of the top 10 dealmakers by fees earned.
Foreign banks that made it to the top 10 were JPMorgan Chase & Co., Bank of America-Merrill Lynch, Barclays Plc., Credit Suisse AG, Citigroup Inc., Standard Chartered Plc. and Deutsche Bank AG.
The top 10 banks took home $235 million in fees in 2016, or 53% of the total. In 2015, the corresponding figure was 48.2%.
“At a micro level, overall revenue should have come down. The number of deals of large value has increased. IPO market became very competitive and was a little better in 2016. But fees level is not what it used to be,” said H.V. Harish, partner at Grant Thornton India.
The investment banking revenue compiled by Dealogic comprises fees earned from merger and acquisition (M&A) advisory, debt deals and equity transactions.
In 2016, private equity (PE) and venture capital (VC) deals slowed sharply from the previous year.
According to a report by Bain & Co., PE/VC investments worth about $16 billion were recorded in 2016 across 965 deals as against $22.9 billion across 1,049 deals in 2015. This was a decline of 30% in deal value and 8% in deal volume year-on-year. The spike in PE deals in 2015 was because of positive macroeconomic prospects, along with 2006-07 vintage funds nearing the end of their investment cycle and looking for exits through secondary deals.
This year saw a jump in M&As, as deals in the country more than doubled in terms of value during the nine months ended 30 September, with the third quarter recording the highest deal values, shows a report by consulting firm KPMG.
“The overall investment banking revenue in India this year would have gone down even though ECM (equity capital market) revenue would have jumped this year, backed by some good IPOs and QIPs (qualified institutional placements)...Typical PE investments this year were substituted by some public issues and M&As typically were getting delayed for a variety of reasons. Even ECM activities have now slowed down during the second half after weakness in the secondary market,” said Mahesh Singhi, founder and managing director at Singhi Advisors Pvt. Ltd.
“In the first half of this year, the income made by merchant bankers through IPOs was really good because market was moving which has now slowed down,” he added.