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JPMorgan tops Q3 global ECM league table

New York, September 27, 2010

JPMorgan nabbed the top spot among banks, globally, for equity capital markets underwriting in the first three quarters of 2010, but it hauled in less than half of what it did a year earlier.

The bank kept its No.1 ranking but brought in proceeds of just $39.5 billion compared with $80.07 billion a year earlier.

The bank underwrote 224 offerings compared with 290 a year earlier, according to Thomson Reuters data at the close of US markets on Friday.

Global equity capital markets activity has increased 5.6 per cent to 2,817 deals compared with a year earlier but proceeds have decreased 9 per cent to $496.14 billion. Equity capital markets data includes underwriting of initial public offerings, follow-on offerings and other equity-related securities.

A slow economic recovery may have affected companies' quarterly results and valuations, meaning that IPOs in the pipeline may not be able to fetch top dollar, said Frank Maturo, co-head of equity capital markets for the Americas at Bank of America Merrill Lynch.

That, along with an attractive debt market, may have caused some companies to wait, Maturo said.

In contrast to lagging global ECM activity, global mergers and acquisitions activity has risen as improved financing options and substantial war chests have allowed corporate and private equity buyers to pursue deals.

Worldwide M&A has totaled $1.678 trillion so far this year, up 21 per cent from a year earlier, according to preliminary data from Thomson Reuters.

Still, the third quarter saw a handful of landmark ECM deals. China's AgBank IPO in July raised $22.1 billion. Last Thursday, Brazilian state oil company Petrobras sold $70 billion in shares at a higher-than-expected price, making it the world's biggest ever offering.

To date, Morgan Stanley is in the No. 2 spot (194, $38.64 billion) on the global equity capital markets league table and Goldman Sachs is third (149, $36.34 billion). Bank of America Merrill Lynch is fourth (179, $33.42 billion), and UBS fifth (171, $25.32 billion).

"Data points for how robust the IPO markets are post-Labor Day are still to be determined," Maturo said.

Improved outlook?

The outlook for equity capital markets globally could be improving. In the US, for example - where top US automaker General Motors could raise as much as $20 billion in November - a strong stock market could buoy investors' optimism. As of the close of markets on Friday the S&P 500 was up 9.47 per cent so far in September, its strongest monthly gain since March 2000 when it was up 9.67 per cent.

The end of summer holidays and a lessening worry that the European sovereign debt crisis will spread could also help.

"It will continue to be selective, deal by deal, and deals will be priced for their own, specific fundamentals, but on balance I think we're in a much more constructive phase of the market than we have been in some time," said Mark Hantho, global co-head of equity capital markets at Deutsche Bank.

In October the Asian life insurance business of American International Group Inc, AIA Group Ltd, could raise about $15 billion. The IPO comes after AIG failed to sell its Asian business earlier this year to Britain's Prudential Plc for $35.5 billion. The British insurer had asked AIG to cut the price to $30.4 billion, but it was turned down, leading to the termination of the agreement.

AIG, which is nearly 80-per cent owned by the US government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.

In November, GM, another company bailed out by US taxpayers is expected to have its IPO. The IPO, scheduled for directly after US midterm Congressional elections will begin the process of repaying the US government for its $50 billion bailout, after which it retained a 61-per cent stake.

There are also a handful of large private equity-backed IPOs in the US pipeline. Hospital operator HCA Inc has filed to raise up to $4.6 billion and Toys R Us Inc has filed to raise up to $800 million. Nielsen Holdings BV, best known for viewership ratings that often determine the fate of TV shows, hopes to raise $2.01 billion.

"Clearly if the deals price well and trade well there will be follow through to that," Bank of America's Maturo said, when asked about a broader pickup in IPOs. He added that with the cheap cost of debt, the private equity-backed deals are not being forced into IPOs.

"The market has picked up substantially in September but valuations are not quite as attractive as some might like to see," he added. "It's possible we'll see a number of deals pushed to late 2010 or 2011." – Reuters




Tags: IPO | New York | JP Morgan | underwriting | ECM |

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