Investment bankers are expected to have a sombre Christmas this year, as fee income has dropped significantly. According to a study by Thomson Reuters, investment banking fees have declined by 36.3% over the year in 2008. Last year, in 2007, investment banking (IB) fees had touched the highest fee volume on record for India, with amounts crossing the $1-billion mark in revenues earned from deal-making.
Similarly, in Asia, excluding Japan, investment banking businesses have seen a 30% decline. Fees paid in the region continued to decline since the 19.3% decrease recorded for July 2008. In India, mergers and acquisition (M&A) businesses and equity capital markets (ECM) segments contributed to almost 41% and 45% of total investment banking fee pool respectively. ?It is the amount that has fallen drastically and not the number of deals. This shows that there is business happening, but at lower values,? said an investment banker with an Indian entity.
There were around 1,472 deals that were closed in 2007; for this year, till date, around 1,468 deals have been done. ?The earlier part of the year witnessed sluggishness as many businessmen were reluctant to close deals at lower valuations.
Now, they have understood the reality and are ready to accept lower valuations,? he added. ?Considering the market has halved, fee income falling by 36% is not bad; things could?ve been worse,? the investment banker opined.
However, the slowdown has taken its toll. Two out of the four deal segments are down, with ECM being hit the most with a 81.7% decline, says the report. Syndicated loans and M&A segments showed a slight increase. Both segments grew by 3.1% each over the previous year. State-owned SBI is the top fee earner so far this year, with a majority of the fees garnered from the loans market.