Bank of America Corp. has made twice as much in fees selling structured notes than arranging initial stock offerings in the U.S. as the market for the complex products recovers after the financial crisis.
This year the Charlotte, North Carolina-based bank has disclosed $129.7 million in fees and commissions on structured notes, which are bonds packaged with derivatives, according to data from regulatory filings compiled by Bloomberg. That compares with $62.8 million in revenue from underwriting U.S. initial public offerings, according to Bloomberg data.
Total sales of structured notes fell 10 percent in 2009 after the September 2008 failure of Lehman Brothers Holdings Inc., an industry database called StructuredRetailProducts.com shows. The market for the securities is returning, while new companies remain hesitant to offer stock to the public, said Marty Mosby, an analyst at Guggenheim Securities in Memphis, Tennessee. IPO volume last year dropped 44 percent to $16.5 billion, Bloomberg data show.
“As the structured market returns to more normal levels, it tells us that the financial markets are beginning to show some healing,” Mosby said Aug. 16 in a telephone interview. “The structured-notes market is coming back, while there’s not a lot of incremental growth in the economy.”
Morgan Stanley’s Fees
Bank of America was one of two banks whose note offerings in the U.S. generated more fees than IPOs, the data show. The fees on Morgan Stanley’s structured notes totaled $119 million, which is more than the $118 million on IPOs it underwrote, the data show. Banks this year have disclosed a total of $470.6 million in fees on structured notes, some of which is shared with other firms and brokers.
Selena Morris, a Bank of America spokeswoman, and Mark Lake, a Morgan Stanley spokesman, declined to comment.
Bank of America has sold $7 billion of structured notes to U.S. investors this year, the most of any bank, Bloomberg data show. That’s 70 percent more than the $4.1 billion it sold all of last year, according to StructuredRetailProducts.com.
Bank of America helped expand its structured-products business through its acquisition of Merrill Lynch & Co. and its army of about 15,000 brokers in 2009, Mosby said. Before the merger, Merrill Lynch was the top issuer of structured notes, with $6.3 billion in U.S. sales in 2008, according to StructuredRetailProducts.com.
Statistics on revenue in the structured-notes industry are incomplete, because many products are sold in private placements that aren’t reported to regulators. The price of the securities also generally includes undisclosed fees, such as a profit for the issuer.