Investment banking fees fall 10% in 2020
Investment banks saw their fee revenue in Brazil fall 10% last year in dollar terms, to $945 million, a survey by American consultancy Dealogic shows. In spite of strong activity in equities, which made banks scramble to cope with so many mandates, the bottom line fell from 2019 because of the contraction of the other activities - from bond issuance, which reached a high in 2019 on the local market, to mergers and acquisitions, which tend to produce the biggest fees.
Stock offering accounted for 64% of fee revenues in 2020, or $605.9 million, an emblematic share - in the previous year, when it already had been the biggest revenue source, they stood at $583.2 million, a little more than half of the total.
In volume of transactions carried out, it was the second-biggest year for stock offerings in Brazil, only behind 2010, when Petrobras made a mega-offering that pushed the total figure up - thus some bankers consider that year an exception and refer to 2020 as record, for giving a better illustration of the market demand for stocks. It was also a year of large issues - such offerings tend to pay lower fees to the banks, since the total payment will be higher.
Yet this time there were some peculiarities. The biggest offering of the year, of R$22 billion in Petrobras shares, had fee of 0.2%, or R$44 million - paying less to the banks than transactions with 10% of that volume, such as that of startup Enjoei. The biggest volume of fees in the year came from hospital group Rede D'Or, because the offering was very big, but the most profitable for banks was of retailer Grupo Mateus.
While D'Or paid R$244.9 million to the 10 underwriters of its R$11.4 billion IPO, Mateus paid almost the same for a R$4.6 billion offering: R$214 million, a fee of 5.25%, more commonly seen in small offerings, whereas D'Or managed to squeeze it to 2.15%. Enjoei, startup Méliuz, industrial-service provider Priner, management-software provider Neogrid, which made smaller issues, paid fees above 5%. In offerings of R$2 billion or higher, that percentage corresponds to the sum of banking fees plus expenses of the transaction, as was the case of retailers Petz and Quero-Quero.
Fees from bond issues shrank 32% last year, to $134.2 million, and the revenue from syndicated loans almost disappeared, to $7.5 million from $50 million. M&A fees stood at $194 million, down 33% from 2019.
Total banking fees also are affected by currency swings...
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