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Underwriting Business Trends for the year
Citigroup’s Underwriting Business Jumps
25%
Citigroup’s underwriting business rose by 25% during 2003, from
$4.26 trillion in 2002, to $5.33 trillion in 2003, according to data from
Thompson Financial. This is the third year in a row that Citigroup led
other underwriters in earning a lion share of the global underwriting
business. Low interest rates in 2003, led to an increase in the volume
of new bonds issued during the course of the year. The strong stock market
performance in 2003, also contributed in part to such rise, by enabling
more firms to raise additional business capital.
Morgan Stanley earned a second place, replacing Merrill Lynch which dropped
to third position, Lehman Brothers, J.P.Morgan and Credit Suisse First
Boston became the fourth, fifth and sixth largest underwriter in the world
respectively. Citigroup also earned more fees from its operations than
other underwriters, with a total of $1.76 billion during the 2003 session,
while Morgan Stanley and J.P.Morgan maintained the second and third places
respectively, but the overall income from fees industry- wide dropped
by a reported 2 percent.
Future Trends for Underwriters
Richard Peterson, a market strategist with Thompson Financial thinks
the new issuance trend is moving in an upward direction, and as such,
2004 would see additional gains in the fee earnings of underwriters. According
to Thompson Financial, there is renewed activity in the IPO market, and
in December 2003, there were 24 new issues coming to market, making December
the busiest month of IPO offerings since October 2000.Quinten Stephens,
the co-head of equity capital markets at J.P.Morgan thinks that the resolution
of the Iraqi crisis would help corporate profitability. Quinten said,
“Continued economic strength and corporate profitability will drive
issuance in 2004.” Quinten added, "Our sense is the pipeline
is relatively strong (for equity offerings) in the first part of 2004;
the material risk to equity capital markets is that the global economic
recovery stalls, perhaps because of an external market shock." Donald
Johnston, head of corporate advisory at Deutsche Bank AG projects that
cross-border merger activity would see an increased action in 2004; such
increase is expected in the 15-20% range. According to him, U.S.Firms
would be more aggressive in 2004 in Europe regardless of the weak U.S.
dollar.
Paul Oranika,
Editor-in-chief,
Hedgeco.net
Author of new book: Hedgefunds: Investment vehicles for the global economy,
what investors must know about them.
Available from: Amazon.com
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