Middle East investment bank fees slump in 2014

Dubai: The Middle East investment banking fees earned during 2014 declined 3 per cent from $776.2 million (Dh2.85 billion) during 2013, to $751.7 million despite strong recovery in equity capital markets activities and an uptick in fees during the last quarter, according to data from Thomson Reuters.

The region’s investment banking fees reached $147.25 million during the fourth quarter of 2014, up 19 per cent compared to the value recorded during the previous quarter.

Equity capital markets (ECM) underwriting fees totalled $125.1 million in 2014, up 163 per cent from the previous year ($47.5 million), and marking the best annual total for ECM fees in the Middle East since 2009.

Fees from completed M & A transactions totalled $159.2 million, down 5 per cent from 2013 and accounting for 21 per cent of the fee pool. Fees from debt capital markets underwriting declined 27 per cent year-on-year to $86.8 million, while syndicated lending fees fell 21 per cent to $233.4 million.

Analysts said the decline in fee income points to the high level of competition in the market despite increase in total value of deals.

For example in M & A, the year finished 23 per cent up on 2013 with $50.3 billion of announced M & A transactions in the region, the highest annual total since 2010. Outbound M & A drove 2014 activity, up 74 per cent from 2013 to reach $26 billion, the highest annual total since 2009.

Qatar’s overseas acquisitions accounted for 65 per cent of Middle Eastern outbound M & A activity, while acquisitions by UAE and Saudi Arabian companies accounted for 15 per cent and 9 per cent, respectively.

“The value of announced M & A transactions with any Middle Eastern involvement reached $22.7 billion during the fourth quarter of 2014, more than double the value registered during the previous quarter, and the highest quarterly total since the first quarter of 2008,” said Nadim Najjar, managing director, Middle East and North Africa, Thomson Reuters.

Data showed that HSBC earned the most investment banking fees in the Middle East during 2014, a total of $56.9 million for a 7.6 per cent share of the total fee pool. Lazard topped the Middle Eastern completed M & A fee league table, while HSBC was first in the equity and debt underwriting fee rankings. Mizuho Financial Group took the top spot in the Middle Eastern loans fee ranking.

Citi topped the 2014 announced any Middle Eastern involvement M & A league table with US$15.4 billion.

The region’s equity and equity-related issuance totalled $11.4 billion in 2014, a 173 per cent increase in activity from 2013 ($4.2 billion). Thirteen initial public offerings raised $7.9 billion and accounted for 69 per cent of activity in the region. Follow-on and convertible offerings accounted for 22 per cent and 9 per cent, respectively.

Middle Eastern debt issuance reached $3.5 billion during the fourth quarter of 2014, half the value raised during the third quarter. Bonds issued during 2014 decreased 6 per cent from 2013, to $37 billion. The UAE was the most active nation accounting for 48 per cent of activity, followed by Saudi Arabia with 30 per cent. International Islamic debt issuance increased 18 per cent year-on-year to reach $39.1 billion.