May 29 (Bloomberg) -- The lights may be going out on Wall Street, where for the first time since World War II bankers are on the verge of earning less from initial public offerings than in Europe.

As American underwriters continue to charge double the going fee rate on European IPOs, the total amount of money raised in Europe so far this year is 78 percent greater than the value of U.S. offerings, data compiled by Bloomberg show. As a result, the historic bank-earnings gap between the two markets is barely perceptible: more than $1.1 billion in fees from IPOs in Europe, compared with about $1.4 billion from initial sales on American stock exchanges. In 2002, investment banks earned five times as much taking companies public in the U.S. as they did in Europe.

``The move towards favoring London is here to stay,'' said Viswas Raghavan, JPMorgan Chase & Co.'s London-based head of capital markets for Europe, the Middle East, Africa and the Asia- Pacific region. ``There's sufficient liquidity in our time zone without having to rely on U.S. investors for demand. London is rapidly becoming a new Big Board.''

Bankers in Europe are profiting from a torrent of equity sales by Russian banks, Norwegian oil and gas companies and British property developers. The deluge is almost certain to continue this year as companies ranging from Dong Energy A/S in Denmark to PIK Group in Russia line up to sell shares in buoyant equity markets.

Not a Phenomenon

IPOs in Europe have raised $37.8 billion so far this year, exceeding the $21.2 billion of stock sold on U.S. exchanges, as state-controlled companies including the Russian bank VTB Group and Aeroports de Paris SA, operator of the Charles de Gaulle and Orly airports, issued shares for the first time, according to Bloomberg data.

``It's the broadest-based business I have ever seen,'' said Michael Lavelle, the London-based head of Citigroup Inc.'s European equity capital markets unit. ``The size and depth of the European economies is such that we believe this isn't just a bull-market phenomenon.''

While money is being raised at a record pace in Europe and Asia, public offerings in the U.S. haven't returned to levels reached at the height of dot-com euphoria in 1999. Fourteen of the world's 15 biggest IPOs this year were listed outside of the U.S. Non-U.S. issuers have been wary of listing in New York because of stricter financial-reporting requirements, imposed by the 2002 Sarbanes-Oxley Act, and the U.S. dollar's 30 percent drop in the past five years.

U.S. bankers aren't making it any easier. They have held the average fee steady at about 6.7 percent of the amount of the IPO since 2002, while European bankers charge about 3.2 percent, Bloomberg data show.

Europe's Lure

Malon Wilkus, chief executive officer of Bethesda, Maryland- based American Capital Strategies Ltd., said the high costs of listing in the U.S. and regulatory obstacles are prompting him to consider selling shares in London for one of the companies he holds as an investment.

``We think this will be a very dynamic company, but it can't today go public in the U.S., and it can in London with lower fees,'' Wilkus said in an interview.

Catalytic Solutions Inc., an Oxnard, California-based maker of automobile parts, and Napo Pharmaceuticals Inc., a South San Francisco-based drugmaker, both listed on London exchanges last year. New York-based buyout firm Kohlberg Kravis Roberts & Co. raised $5 billion a year ago for its KKR Private Equity Investors LP fund on the Amsterdam exchange.

7 Percent Fees

Fees in Europe range from 1 percent on Sports Direct International Plc's $1.8 billion IPO to 5.4 percent for Biancamano SpA, which raised $51.7 million in March. Moscow-based VTB Bank paid Citigroup, Deutsche Bank AG, Goldman Sachs Group Inc. and Renaissance Capital Group only 1.1 percent when it sold $8 billion of stock earlier this month. Underwriting fees for more than half of the deals in Europe are undisclosed.

By comparison, 71 of the 111 initial stock sales on U.S. exchanges this year paid commissions of 7 percent or more.

The European market has more than twice the number of firms competing for business, giving executives the leverage to cherry- pick bankers and drive down prices. At least 95 firms played a role in arranging IPOs in Europe this year, compared with 41 in the U.S., Bloomberg data show.

U.S. Treasury Secretary Henry Paulson has called for streamlining securities rules and curbing shareholder lawsuits to increase competition with less regulated overseas markets. Unless such changes are made, the U.S. probably will lose its place as the world's leading financial center in a decade, according to a report released in January by Senator Charles Schumer, a New York Democrat, and New York City Mayor Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

Long-Term Cost

New York Governor Eliot Spitzer said today he created a commission to help the state ``retain and enhance its status as a world financial capital.'' Commission members will review regulations and government policies and propose legislative changes, Spitzer said in a statement.

``The fact that the number of IPOs here is limited, despite the well-being of the economy, suggests there is some friction in the capital market,'' said Luigi Zingales, a finance professor at the University of Chicago Graduate School of Business and a member of the Committee on Capital Markets Regulation, a group endorsed by Paulson. ``This may have a long-term cost on the U.S. economy.''

Zingales said he is ``a bit disappointed'' with the pace of progress on some of the committee's recommendations, which included creating an out-of-court system to resolve shareholder lawsuits against companies. Last week, the U.S. Securities and Exchange Commission approved guidelines that may reduce the cost of complying with parts of Sarbanes-Oxley.

Benefits of Governance

Some companies prefer the U.S. because they find that the burden of meeting higher regulatory standards encourages a culture of tighter controls and appeals to investors, said Catherine Kinney, co-president of NYSE Euronext, the New York- based operator of the world's largest stock exchange.

``You see these young entrepreneurial companies wanting to step up to the higher governance,'' said Kinney, who also serves on the 23-member committee with Zingales, former Goldman President John Thornton and Glenn Hubbard, dean of Columbia University's business school in New York. ``While some companies would argue it's expensive, others argue it's worth it.''

Faster economic growth helped the U.S. eclipse Europe as the global center for capital raising since the end of World War II, said Howard M. Wachtel, author of ``Street of Dreams: Boulevard of Broken Hearts,'' a history of Wall Street. The term initial public offering became popular in the 1980s, when individual investors started participating in equity offerings, he said.

Skeptical Professor

``You can only really say that New York became the primary place for international capital in the second half of the 20th Century,'' said Wachtel, an economics professor at American University in Washington. ``Wall Street from the very beginning, starting in 1792, has claimed that any kind of regulation would put it at a competitive disadvantage. I'm a bit skeptical.''

Zurich-based UBS AG, Europe's biggest bank by assets, ranks first among global arrangers of IPOs, followed by New York-based Goldman and Merrill Lynch & Co., according to Bloomberg data. For IPOs on European exchanges, Goldman, the world's top securities firm by market value, is No. 1, followed by Frankfurt-based Deutsche Bank and then New York-based Citigroup and JPMorgan.

The largest U.S. stock exchanges are seeking to extend their reach overseas, too. NYSE Group Inc., owner of the New York Stock Exchange, last month acquired Paris-based Euronext NV for $14 billion to gain control of bourses in four European countries. Smaller rival Nasdaq Stock Market Inc. last week agreed to pay $3.7 billion for OMX AB, operator of seven Nordic and Baltic stock exchanges.

Europe Catches Up

Companies listing in the U.S. have been willing to pay higher underwriting fees because they want to tap a larger base of investors and sell shares at a loftier price, said Tom Fox, the New York-based co-head of equity capital markets at UBS.

``That's simply not the case today, with liquidity in the European and Asian markets now rivaling the U.S.,'' said Fox, who expects IPOs in Europe to outpace offerings in the U.S. and Asia for the remainder of the year.

Shares of VTB Group, Russia's second-biggest bank, climbed 8.4 percent in London during the first day of so-called conditional trading on May 11, reflecting the strength of investor demand for the company's $8 billion IPO. The initial stock sale is the world's largest this year.

Fox added that the backlog of shares in Europe is ``considerably larger'' than in the U.S.

IPOs Lined Up

Planned sales by Russia's PIK Group, the country's largest residential developer, and Vector Hospitality Plc, a U.K. hotel owner, may sustain the boom in Europe by raising as much as $7.2 billion. Marfin Investment Group SA, the Greek lender that wants to transform itself into southeast Europe's biggest buyout fund, may raise $7 billion more.

Dong Energy, Denmark's state-owned oil and gas company, hired Citigroup, Morgan Stanley and Danske Bank A/S to coordinate the sale to the public later this year of a stake as large as 28 percent.

In the U.S., there are 207 share sales, including IPOs, waiting to tap the public market, according to research by Morningnotes.com, a Boulder, Colorado-based firm that tracks the IPO market. The proposed $4.75 billion IPO by New York-based buyout firm Blackstone Group LP would be the biggest in the U.S. this year.

``The U.S. remains more profitable for Wall Street firms'' because the fees per deal are higher, Citigroup's Lavelle said. ``However, the net contribution from Europe is now more meaningful as the cost base is more established and revenue is growing faster.''

To contact the reporters on this story: Edgar Ortega in New York at ebarrales@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: May 29, 2007 16:26 EDT