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Healthy Growth in Investment Banks’ Advisory and Underwriting Fees

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Aug. 14 2017, Published 9:23 p.m. ET

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. 

The uptick in debt origination activity over the last few quarters resulted in robust growth in total fees. M&A[1. mergers and acquisitions] advisory fees contributed around 33% of the total fees, while the share of equity underwriting fees was 17%.

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