JPMorgan Repeats as Top Debt Underwriter as Bankers See Fees Dip


From ketchup to communications, bankers jockeyed for a smaller volume of bond deals last year as fees slid 1.7 percent to $18.9 billion.

JPMorgan Chase led Bloomberg Markets’ annual ranking of debt underwriters for the sixth straight year, the magazine will report in its April issue.

The biggest U.S. bank by assets earned an estimated $1.34 billion in bond fees in 2013, an 11 percent drop from 2012. Morgan Stanley climbed into the top 5 for the first time in six years, moving to No. 4. Bank of America Merrill Lynch, Citigroup and Deutsche Bank rounded out the five best performers.

Banks that had benefited in 2012 as companies raced to refinance their debt found a different landscape last year. After an unprecedented $4.98 trillion of corporate, sovereign and agency issuance in 2012, sales slipped by 3.8 percent to $4.79 trillion -- even as average yields on the debt hit a record low of 1.5 percent in May.

This year, sales may slow further. Companies had less need to borrow in a fifth year of central bank stimulus, says Richard Zogheb, co-head of capital markets origination for the Americas at No. 3 Citigroup. And as the U.S. Federal Reserve trims monthly asset purchases, bankers expect bond yields to rise.

Economists surveyed by Bloomberg predict 10-year Treasury yields will end the year at 3.36 percent, up from 2.7 percent on March 4.

Liquidity Drain

“A combination of the economy starting to feel better and the Fed tapering its quantitative-easing program will allow rates to go up,” Zogheb says. “It’s also going to take some of the liquidity in the bond market and have it go elsewhere.”

Even as bankers saw sales volume decline, 2013 was a year of blockbusters. Verizon Communications Inc. set a record in September with a $49 billion offering of bonds in eight parts -- the biggest company debt sale ever.

Four of the six most-active bond underwriters -- Bank of America Merrill Lynch, Barclays Capital, JPMorgan Chase and Morgan Stanley -- won assignments managing the offering, Verizon said in regulatory filings. Just five months earlier, Apple Inc. had completed its $17 billion sale, a record at the time and still the second-biggest corporate offering in history.

‘Incredibly Attractive’

Firms that borrowed locked in low rates in 2013 as the Fed bought $85 billion of Treasuries and mortgage-backed debt each month. Ketchup maker H.J. Heinz sold $3.1 billion of dollar-denominated bonds last March at the lowest coupon on record for comparable debt issued by a speculative-grade company, Bloomberg data show. Wells Fargo & Co., Barclays, Citigroup and JPMorgan helped distribute the notes.

Raj Dhanda, co-head of global capital markets at Morgan Stanley in New York, sees a bright spot for the capital markets in 2014: a possible boom in acquisitions and leveraged buyouts that would require companies to borrow.

“The credit markets are still incredibly attractive by any historic standards,” he says. “If in 2013 it was the investors who were more confident about market conditions than corporate boards, today I think corporations are increasingly confident and are considering strategic financings.”

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