Underwriting: Q1- 08

Citigroup Inc missed its title as the world's largest underwriter of stocks and bonds for the first time in more than six years, said Thomson Financial.

According to Thomson, Securities underwriting volume fell by 45% from a year earlier to $1.27 trillion, and fees collected by I- banks fell 47% to $5.8 billion.

JPMorgan Chase & Co was the top underwriter in the first quarter. JPMorgan arranged $129.4 billion of offerings, winning a 10.2 percent share.

Citigroup followed with $94.7 billion of offerings and a 7.5 percent share.

Deutsche Bank AG was third, with $91.8 billion of offerings and a 7.2 percent share.

Reported fees fell by 7% to $3.38 billion from $3.65 billion.

Citigroup led in that area with a 15.6 percent share, followed by Bank of America Corp's 8.9 percent and Goldman Sachs Group Inc's 7.8 percent. JPMorgan was fourth.

Wall Street bankers said Citigroup's fall from first place partly reflected a change in strategy by its new management. Citigroup in a statement said it manages its business "for productivity and profitability rather than league table position."

Bear Stearns Cos, a fixed-income specialist that agreed to a takeover by JPMorgan following liquidity problems, ranked 18th in underwriting and 23rd in reported fees.

Merger volume, meanwhile, fell 41 percent worldwide and 56 percent in the United States, Dealogic said last week, suggesting lower need for future bond and loan offerings.

"There was a total contraction in credit," said Richard Peterson, director of capital markets at Thomson. "We don't know if there are more hidden time-bombs. The market is sensing there could be more."

News & Related Links

Reuters – Citigroup dethroned in dismal underwriting quarter

Financial Week – Citi finally knocked off its throne as top underwriter

Wall Street Journal – Debt Turmoil Hits Street Stock, Bond Sales

Deutsche Hit by $4 Billion Write-Down in Q1-08

Deutsche Bank expects first-quarter write-downs of 2.5 billion euros, ($4 billion) related to leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities

Deutsche Bank said as it had indicated on Earlier (Mar 26) that 'markets remained difficult early in 2008', adding that 'conditions have become significantly more challenging during the last few weeks.'

Deutsche Bank expects a BIS Tier 1 capital ratio at the end of the first quarter 2008 of between 8 and 9 percent, consistent with the bank's published targets.

For the rest of 2008, the risks for the banking industry are accumulating, especially for those firms, such as Deutsche Bank, with significant exposure to the U.S. markets.

CNN Money – Deutsche Bank Sees Q1 Mark-Downs of Around 2.5 Bln Eur

Forbes – Bad News From Deutsche Bank

Q1-08 Deals

Global M&A volumes fell 31% to $661 billion in the first quarter of 2008, according to Thomson Financial.

Buyout firms led the collapse in deals as their buying power evaporated and they saw a 77 percent fall in acquisitions after 6 years' growth.

The credit crunch has dented banks' confidence in lending to buyout firms, which rely on debt to achieve their returns.

Meantime slowing U.S. and European economies and volatile markets are making corporate CEOs reluctant to take large risks.

After four years U.S. M&A activity is on track to see its first annual decline since 2002, according to a recent report from Thomson Financial Proprietary Research.

Europe remained ahead of the U.S. in terms of deal volumes and also better-weathered the downturn. European M&A activity accounted for 301 bln usd, which is 10 pct lower than in the first quarter 2007.

Goldman Sachs advised on the most merger and acquisition deals worldwide in the first quarter of this year, followed by Lehman Brothers and Citigroup. Morgan Stanley, which had led the rankings in the same period last year, dropped to number 6.

The top global M&A advisors in the first quarter of 2008 are, in descending order:
Goldman Sachs , Lehman Brothers , Citigroup , Credit Suisse , Deutsche Bank, Morgan Stanley, Centerview Partners, JP Morgan, Merrill Lynch.

Goldman Sachs worked on 81 deals worth $231.5 billion, followed in the second and third spots by Lehman Brothers and Citigroup Inc, which advised on global deals worth $203 billion and $190 billion, respectively.

Citigroup was the most active adviser on deals with a European element. It worked on 42 of these transactions worth $161.6 billion. Credit Suisse was the next most active bank in this respect, working on 36 deals worth $149.7 billion, followed by Goldman, which advised on deals worth $147 billion.

Goldman led in terms of estimated fees for the quarter as well. It earned fees of $399.9 million from its global M&A work, including $200 million for deals including European element.

Merrill Lynch and Credit Suisse were the next most profitable in terms of global fee revenue. Merrill earned $291.8 million and Credit Suisse earned $287.6 million.

In Europe, Morgan Stanley (MS) was the second most lucrative fee earner. It generated $181 million in fees from M&A, followed by Merrill Lynch, which earned $168.6 million.

Announced M&A deals in the US were even lower at a five-year low of 189 bln usd, 53 pct lower than in the first quarter 2007 (401 bln usd). The US recorded the lowest first quarter figures since 2003 (71 bln usd).

Thomson Financial's M&A review also showed a shift in the ranking of investment banks advising on M&A deals in the first quarter of 2008.

Globally, Goldman Sachs Group Inc reached pole position in the year to date, with mandates for deals valued at 231.5 bln usd. In the first quarter of 2007 it was ranked second.

The investment banking arm of Lehman Brothers Holdings Inc soared from sixth place in the first quarter of 2007 to second place in the global ranking, with mandates valued at 203.5 bln usd this year.

In the category of transactions with any European involvement, Citigroup Inc led the pack in the first quarter of 2008, with mandates worth 161.6 bln usd, followed by Credit Suisse Group (149.7 bln usd), Goldman Sachs (147 bln usd) and Lehman Brothers (141.2 bln usd).

U.S. merger volumes are estimated to reach only about $1 trillion in 2008. Still, report said “Looking at the second half of 2008, an improving credit market along with a significant level of available funds for private equity to put to use will likely boost the environment for M&A gains,” the.

News and Related Story Links:

Reuters – Global M&A volumes tumbled by a third in Q1

The Age – M&A bankers suffer 35% drop in fees

CNN Money – Global M&A value drops 31 % to $661 bln in Q1; US value drops 54%

Money Morning – Don’t Be Fooled by a Lull in M&A Activity, More Deals Are on the Way