JPMorgan Chase & Co. (JPM), the biggest U.S. lender by assets, is forecasting a 30 percent surge in the value of mergers and acquisitions the bank expects to handle in Asia next year, a rebound from this year’s decline.
Energy companies, financial firms and Asian buyers expanding in the U.S. and Europe will drive a surge in activity for JPMorgan, said Rob Sivitilli, 41, who has been head of Asian M&A outside Japan since September 2012. The New York-based bank climbed this year to No. 2 among advisers in the region from No. 4 in 2012, data compiled by Bloomberg show.
JPMorgan rose in deal rankings by improving communication between bankers in Asia and colleagues in North America and Europe, Sivitilli said. Takeover activity declined this year in the region as slowing economies from India to China curbed executives’ risk appetite. Mergers involving Asian companies may fall short of last year’s $311 billion after ending last week at $298 billion, data compiled by Bloomberg show.
“We have enough visibility on first-quarter and second-quarter activity that leads us to project ourselves into a much higher level of performance in 2014,” Sivitilli said in a Nov. 25 interview in Singapore. “We continue to see further gains in market share.”
A higher ranking among Asian merger advisers this year would be a bright spot for JPMorgan, which in October reported its first quarterly loss under Chief Executive Officer Jamie Dimon after taking a charge to cover the cost of mounting litigation and regulatory probes.
Among the investigations is an examination of whether JPMorgan violated anti-bribery laws by hiring the relatives of well-connected politicians and clients in China so that their family members would steer business to the firm, a person with knowledge of the probe said in August. The bank has said it is cooperating with authorities. Sivitilli declined to comment.
The banker joined JPMorgan in New York in 1996 and moved to Singapore in 2010 when he was appointed the lender’s head of Southeast Asian corporate finance and mergers and acquisitions. He retains the corporate finance role.
His group in Asia was involved in deals valued at $42.4 billion this year, behind only Morgan Stanley’s $47.7 billion, data compiled by Bloomberg show. JPMorgan’s transactions this year are 34 percent lower than 2012’s $64 billion, with less than a month of deal-making left.
Sivitilli didn’t provide a specific target for next year and declined to comment on whether the firm will hire bankers in anticipation of the increased business.
The bank has advised on 46 Asian transactions announced this year, led by a pending $7.3 billion merger between SM Land Inc. and SM Prime Holdings Inc., the largest shopping-mall operator in the Philippines. Morgan Stanley was also involved in 46 deals this year, the data show.
JPMorgan generated $3.9 billion in revenue from the Asia-Pacific corporate and investment bank in the nine months through September, 22 percent more than a year earlier, according to an earnings statement posted on the lender’s website. That accounted for about 14 percent of global corporate and investment bank revenue.
Its global advisory business generated $881 million of revenue for the nine months, or 3 percent of corporate and investment bank revenue. The total was 14 percent lower than a year earlier.
The drop in JPMorgan’s Asian deals this year contrasts with the 38 percent increase in the value of transactions involving U.S. companies that the bank managed, or the 42 percent gain on European takeovers, amid improving prospects for the two regions’ economies. About $1.56 trillion of M&A deals were announced in the U.S. and Europe this year, about the same as 2012’s total.
In Asia, “this was a year where there were a lot of large deals that almost happened, but in the end, there were some characteristics in the marketplace that got them away,” Sivitilli said. “In some cases, it was foreign stock markets trading up, while Asia stock markets were flat.”
The U.S. Standard & Poor’s 500 Index (SPX) surged 25 percent this year through yesterday, while the Stoxx Europe 600 Index rose 12 percent. The MSCI Asia excluding Japan Index added 0.6 percent.
The introduction of formal reporting lines into two global M&A heads at JPMorgan -- Hernan Cristerna and Christopher Ventresca -- improved communications between its deal bankers and led to the bank’s involvement in more transactions between companies in Asia and those outside the region, according to Sivitilli.
He cited as an example China Petrochemical Corp.’s $3.1 billion purchase of a stake in Apache Corp.’s Egyptian oil and gas business. JPMorgan advised Sinopec, as the Chinese oil refiner is known.
Annie Choi, an external spokeswoman for Sinopec in Hong Kong, said in an e-mail today that the company cannot comment on the performance of its advisers.
The bank also advised Hong Kong billionaire Li Ka-shing’s Hutchison Whampoa Ltd., which agreed to buy Telefonica SA’s Irish unit for as much as $1.1 billion in June.
Increasing signs over the past two years that the U.S. and European economies have stabilized will lure more interest from Chinese, Hong Kong and Taiwanese acquirers, Sivitilli said.
U.S. output will probably expand 3 percent in 2014, more than the 2.15 percent projected for this year, according to Federal Reserve estimates. The euro area’s gross domestic product may expand 1.1 percent next year, after shrinking 0.4 percent this year, European Central Bank forecasts show.
“If some of the large economies like the U.S. are able to get the motor running just a little bit faster, there’s an enormous amount of value that gets created in those markets,” Sivitilli said.
Oil and gas mergers are poised to increase as some Asian countries look to shore up energy reserves, Sivitilli said. Countries from Singapore to India import at least 80 percent of their oil needs, according to government data.
Takeovers of banks amounted to $18.4 billion in Asia excluding Japan this year, the most among all industries, data compiled by Bloomberg show. The biggest of those deals was Mitsubishi UFJ Financial Group Inc.’s $5.6 billion offer in July for as much as 75 percent of Thailand’s Bank of Ayudhya Pcl. JPMorgan wasn’t involved in that transaction.
The U.S. bank worked on behalf of ING Groep NV to sell its South Korean insurance unit to MBK Partners Ltd., an Asian buyout firm formed by ex-Carlyle Group LP executives, in August for $1.7 billion.
“The M&A market doesn’t move in a straight line,” Sivitilli said. “But when you look out five to 10 years down the road, we know that Asia ex-Japan, Southeast Asia, Greater China, they’re all going to be up significantly relative to where they are now.”
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