By Agency Reporter

Friday, 24 Dec 2010

NEW YORK: Morgan Stanley ended JP Morgan Chase & Company’s two-year run as the top banker for stock sales after charging the lowest fees and winning deals from the United States, China and Brazil to arrange offerings by state-owned companies.

The 75-year-old securities firm’s global market share rose to 10.4 per cent in 2010 on $72.7bn of initial public offerings, additional sales and convertible bond issues, its first top ranking in six years, according to preliminary data compiled by Bloomberg.

JPMorgan was second with $59.7bn, while Goldman Sachs Group Incorporated, Mr. Eric Teal said, dropped to third after its share of US equity underwriting slumped to the lowest level since at least 1998, the data show.

While banks vie for first place in the so-called league tables betting it may lead to more business, Morgan Stanley’s ranking came at a price.

It was paid an average 2.3 per cent fee, the lowest of the top 10 banks, after underwriting state-backed sales of General Motors Company, Citigroup Incorporated Agricultural Bank of China Limited and Petroleo Brasileiro SA.

“If the banks wanted to remain active, they’ve had to participate in some of the government-sponsored programs,” Chief Investment Officer at First Citizens Bancshares Incorporated in Raleigh, North Carolina, which manages $4.5bn .

Mr. Eric Teal said, “Like most government programs, they tend not to be highly profitable, but they’re larger in size. It’s about getting in on some of those bigger deals even though there’s less profit.”

Banks arranged $699bn in share sales this year, up 22 per cent from 2009, as the MSCI World Index of 24 developed markets recouped almost all the losses spurred by the collapse of New York-based Lehman Brothers Holdings Incorporated in September 2008.

About 37 per cent of Morgan Stanley’s underwriting came from state-controlled companies, Bloomberg data show.

“It was the hangover and the legacy of the crisis that the government had stakes,” said Bruce McCain, Cleveland-based chief investment strategist at KeyCorp’s private-banking unit, which oversees $25bn.

“The market had recovered enough this year that it made sense to bring those stakes to market.”

GM, 61 per cent owned by the Treasury, paid 0.75 per cent in fees, or a total of $136m, to underwriters in its $18.1bn IPO last month.

The sale was the second-largest in U.S. history behind San Francisco-based Visa Inc.’s $19.7bn deal in March 2008, data compiled by Bloomberg show. The government spent $49.5bn to rescue the Detroit-based automaker after it filed for bankruptcy in June last year.

Morgan Stanley was the sole lead manager for the Treasury’s sale of $10.5bn of Citigroup stock this month. The deal helped the US recoup some of the $45bn it spent to bail out the New York-based lender. Citigroup paid $42.3m in fees, or 0.4 per cent of the proceeds, according to a filing with the Securities and Exchange Commission.

Agricultural Bank of China in Beijing was charged fees of 1.96 per cent for the Hong Kong portion of its record $22.1bn IPO. Rio de Janeiro-based Petrobras paid 0.65 per cent of the proceeds for the $22.8bn sale underwritten by seven banks in September.

Fees for the government offerings arranged by Morgan Stanley averaged 0.9 per cent, the data show. The firm split a 0.001 percent fee with five banks for India’s sale of a $2.2bn stake in Hyderabad-based NMDC Ltd. in March.

The average stock offering this year paid 3 percent in fees, three times more than on Morgan Stanley’s government deals, the data show.

“We don’t want to ever win or lose business solely on the basis of fees,” John Moore, co-head of U.S. equity capital markets at Morgan Stanley, said in a telephone interview.

“As for large transactions, the benefits of market leadership in a single year are always important. But as, if not more, important is the opportunity to serve clients in varied ways over a long period of time.”

JPMorgan, the second-biggest U.S. bank, underwrote 333 deals, the most this year and almost 10 per cent more than Morgan Stanley, Bloomberg data show. Its market share fell for a second year even as the firm helped arrange sales for GM and Agricultural Bank, and the $20.5bn Hong Kong IPO by AIA Group Ltd., the Asian unit of New York-based American International Group Inc.

The bank retained its top ranking for U.S. corporate bond sales, according to data compiled by Bloomberg. New York-based JPMorgan arranged 13.8 per cent of the investment-grade debt offerings, while winning a 14 per cent share for junk bonds. Tasha Pelio, a New York-based spokeswoman, declined to comment.

In Asia, which accounted for 36 per cent of the world’s equity sales, JPMorgan missed out as Morgan Stanley managed the $3.5bn state-backed sale from Kolkata-based Coal India Limited and Malaysia’s $4.7bn offering of Petronas Chemicals Group Bhd. in Kuala Lumpur.

Goldman Sachs arranged Queensland’s $4.2bn IPO of Brisbane, Australia-based QR National Ltd.

Asia was Goldman Sachs’s biggest market, accounting for 47 per cent of its $57.2bn in deals.

The most profitable securities firm in the history of Wall Street also won the largest share of business in Europe, the Middle East and Africa. It was the sole manager for Boulogne-Billancourt, France-based Renault SA’s sale of a $4.2bn stake in Volvo AB of Gothenburg, Sweden, the region’s largest deal of the year.

The gains failed to offset Goldman Sachs’s decline in the US, where its share plummeted by 51 per cent to 8.6 per cent. Andrea Rachman, a spokeswoman for the New York-based company, declined to comment.

 

Source:Punch