WEST PALM BEACH (HEDGECO.NET)- 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 isthe 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 bondsissued 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.
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.
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