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Financials Overview: Week of August 7–August 11, 2017

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Financials Overview: Week of August 7–August 11, 2017 PART 1 OF 3

Healthy Growth in Investment Banks’ Advisory and Underwriting Fees

Record rise in advisory and underwriting fees

The top five US investment banks, including J.P. Morgan (JPM) and Goldman Sachs (GS), garnered total advisory and underwriting fees of $8 billion in 2Q17. This trend increased 12% year-over-year and 3% sequentially. After 4Q09 and 2Q15, 2Q17 saw the third-highest intake of fees earned by investment banks in any quarter.

The sharp rise in investment banking fees was primarily aided by an increase in debt origination activity over the last few quarters. Many corporates raised fresh debt at lower interest rates as the Federal Reserve has already signaled additional rate hikes in the future. Historically, debt origination fees accounted for almost half of the total investment banking (XLF) fees. 

Healthy Growth in Investment Banks&#8217; Advisory and Underwriting Fees

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The uptick in debt origination activity over the last few quarters resulted in robust growth in total fees. M&A1 advisory fees contributed around 33% of the total fees, while the share of equity underwriting fees was 17%.

Bank of America to offer Premium Rewards card

Bank of America (BAC) plans to roll out its Premium Rewards credit card in September with an annual fee of $95. This annual fee is lower than that charged by competitors JPMorgan Chase (JPM) and American Express (AXP), which charge $450 and $550, respectively, for their top-tier credit offerings. Bank of America aims to target affluent, high-income customers.

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