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NEW YORK - CITIGROUP and Merrill Lynch were the world's top underwriters of stocks and bonds in 2007, measured by volume and reported fees, despite being at the epicentre of the global credit crisis.
While Citigroup remained the top underwriter by volume for an eighth straight year, it ceded its fee crown to Merrill, according to data released on Monday by Thomson Financial.
A pullback in debt issuance industrywide caused the first drop in overall debt and equity underwriting since 2002.
Such pain may continue in 2008, as investors shy away from debt they deem unsafe, leading to further write-downs at major banks. Economists expect that credit losses will trap an even wider array of borrowers.
'If you look at the bottom line, it was the second-best year ever. That's the good spin,' said Richard Peterson, director of capital markets at Thomson Financial. 'The bad spin is that Wall Street staggered across the finish line, with a lot of uncertainty and turmoil in credit markets.' Overall underwriting volume fell 4 per cent to US$7.51 trillion (S$10.9 trillion), Thomson said.
Citigroup arranged US$617.6 billion of offerings, capturing an 8.2 per cent share, Thomson said. JPMorgan Chase was second with US$554.1 billion of offerings and a 7.4 per cent share, followed by Deutsche Bank AG with US$481.9 billion of offerings and a 6.4 per cent share.
Reported fees rose 7 per cent to US$15.92 billion, helped by a 22 per cent gain in volume of more lucrative equity offerings.
Merrill, which ranked fourth in underwriting volume, took a 9.7 per cent share, while Citigroup had 9.3 per cent and JPMorgan 8.6 per cent.
Bankers covet top rankings in Thomson's underwriting 'league tables' for marketing purposes and bragging rights.
Citigroup may post a fourth-quarter loss after projecting a write-down of up to US$11 billion for so-called collateralised debt obligations. Analysts have said that figure might grow.
Merrill, meanwhile, wrote down US$8.4 billion for debt in the third quarter, and analysts expect more write-offs.
Fixed-income bankers
Fixed-income bankers struggled as the credit crisis and housing slump caused steep drops in demand for CDOs and other securities that package various forms of debt.
US asset-backed underwriting volume slid 31 per cent in the year to US$863.6 billion, and fell by more than half after June, Thomson said. US mortgage volume ended the year down 12 per cent, after being up 3 per cent in the year's first half.
While US corporate investment-grade bond issuance set a record, junk bond volume fell short, and declined by about half after June.
Junk bond issuance suffered as private equity funds found financing tough to obtain, moving to back out of such buyouts as student lender SLM Corp, audio equipment maker Harman International Industries and equipment renter United Rentals.
Mr Peterson said January is usually a good month for issuance, but with the US Federal Reserve's open market committee not scheduled to meet before Jan 29-30, 'a lot of issuers may wait to see what the Fed does with rates'.
Equity bankers fared better, as major stock indexes rose despite turmoil in the financial services industry. Global equity offerings US$876.3 billion from US$719.5 billion, and initial public offerings rose 15 per cent to US$308.7 billion.
The year 2008 might also be strong in IPOs, with an expected US$10 billion offering from Visa, the world's largest credit card network, arranged by eight banks. Shares of smaller rival MasterCard Inc have risen more than fivefold since that company's US$2.4 billion IPO in May 2006. -- REUTERS
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