New data shows the impact of COVID-19 on Australia’s investment banking sector
Link copied to
Merger and acquisition deals have been put on ice, but local investment bankers have been kept busy elsewhere in the first half of the year, Refinitiv says.
The data provider’s half-year market update reveals some strong trends in terms of how Australia’s capital markets functioned through the crisis.
For starters, Australia-related M&A activity has totalled just $US22bn (~$32bn) this year — a slump of 54.3 per cent from the first six months of 2019.
M&A bankers have felt the impact, with associated fees falling by around 45 per cent. That drop contributed to a fall in fees generated across the sector by 7.9 per cent to $US939.5m in the first half of 2020.
But while there’s been less buying and selling, the pandemic has created a rush of activity in capital markets (both debt and equity), where business has been booming.
For example, during April (coming off the back of the March panic), M&A deal-flow slowed to its lowest monthly level since January 2016.
But speaking with Stockhead in late April, the head of ECM (Australasia) at UBS, Richard Sleijpen, noted that $11bn was raised on the ASX in the month after markets bottomed on March 23.
To put those levels of equity capital markets (ECM) activity in context, Sleijpen said in an average year the total amount raised was usually around $30bn.
All up, Refinitiv said $US16.9bn worth of equity was raised in the first half of 2020 — a five-year high. A good chunk of that top-line figure was raised by the big end of town, led by National Australia Bank’s $3bn raise.
However, recent analysis from Stockhead showed market liquidity hasn’t been restricted to the larger players.
No less then 66 ASX small caps raised equity capital in the month to May 19, and most of the companies are trading at a premium to the placement offer price.
Debt markets (which are much bigger than equity markets) have also seen plenty of activity, with primary market bond offerings coming in at $US72.2bn during the first half of the year — an increase of 43.9 per cent.
More than half of that has been raised by the federal government, with the Australian Office of Financial Management very active in debt markets during April and May as the Coalition rolled out a historic stimulus package to keep the economy afloat.
The unpredictable market conditions has resulted in some drastic changes on the all-important league tables, where investment bankers compete for the top ranking in overall deal-flow (and more importantly, associated fees).
On the ECM side, Macquarie Group jumped to the number one position (from number four), followed by Goldman Sachs which leaped into second spot (from eighth position).
Perennial leader UBS fell back from number one to number four, but the bank still won the day in terms of fees generated, bringing in $US93m in revenue over the first six months of the year.