Investment banking fees rocket to 10-year high, boosted by big M&A deals and Donald Trump

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JP Morgan Chase came top of Thomson Reuters' investment bank fees estimates table for the first quarter of 2017 (Source: Getty)

Global investment banking fees rocketed to a 10-year high at the start of this year, new figures show.

Boosted by big M&A deals and the so-called “Trump bump”, banks raked in an estimated $24bn (£19bn) in the first quarter of 2017, the best start to a year since 2007.

The figures appear to mark a resurgence for banks after investment fees plunged 7.1 per cent in 2016.

Read more: Investment banking fees plunged in 2016, but analysts predict 2017 pick-up

JP Morgan topped the Thomson Reuters ranking, pulling in $1.7bn, up 37 per cent on the same period in 2016. Goldman Sachs, Bank of America Merrill Lynch and Citi followed, each also recording large percentage jumps.

Investment bank shares have also jumped in the last year, and especially since the election of President Donald Trump. JP Morgan Chase shares are up 47 per cent in the last year, and 25 per cent since Trump was elected on 8 November 2016.

It has been a similar story for its peers, with Goldman up 45 per cent in the last year and 26 per cent since the election and Citigroup up 42 per cent year-on-year and 20 per cent since November.

Barclays, in sixth place globally, was the best-performing European bank. Its investment banking fees are expected to come in at $1bn, up 66 per cent. The British bank’s shares are up 45 per cent in the last year and 18 per cent since Trump was elected.

Ian Gordon, a banking analyst at Investec, told City A.M.:

Unlike certain other peers, [Barclays has] chosen to maintain a significant investment banking business, both in the UK and the US. And I guess data like this would appear to provide a sense of vindication for that decision.

Barclays’ head of UK investment banking and corporate broking Alisdair Gayne said: “The UK is a key part of Barclays' transatlantic focus within the corporate and investment bank and gives us an advantage in connecting clients to the capital markets and executing their advisory transactions globally.

“We are encouraged that our discussions with clients on potential new opportunities remains very strong.”

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Panmure Gordon’s chief economist Simon French said: “Across almost all aspects of investment banking there has been a reassessment of the forward trajectory for debt capital markets, resilience of equity markets, economic growth from the bearish caution of the first half of 2016. The Trump trade is part of this, but it is also the re-assessment of the structural stagnation thesis as global growth has begun to pick up.”

He added: 

In terms of how this has driven fees, well for firms looking to refinance, be acquisitive or raise capital there has been a surge to get ahead or keep up with this inflection. Given the volatile geopolitics has not gone away - it is likely just slumbering - then the incentive to do this ahead of the almost inevitable market turbulence down the line will have brought forward activity across a broad range of investment banking activities.

Banks have been boosted by strong M&A this year, with Mergermarket tracking 3,554 deals worth $678.5bn, up 8.9 per cent on the first quarter of last year. 

The first and fourth biggest deals announced involved UK buyers, British American Tobacco and Reckitt Benckiser respectively.