Investment banking fees crash 32%

MUMBAI: The subprime crisis seems to have had its effect on investment banks in India. Fewer deals and a falling equity market have caused a 31.6% drop in i-banking fees in the country in the first six months. Except a few large local banks, most foreign i-banks and smaller domestic banks have shown a fall in fee income.

Both inbound and outbound deals have seen a 74% and 47% drop, respectively , in the first six months. The Ranbaxy deal announced on Wednesday will not change the number dramatically.

I-banking fees in the country for the first six months were at $354.3 million against $518.3 million last year, according to Thomson Financial. The maximum drop in fees was in the equity capital market, where fees dropped by 40.3% to $93 million while fees from M&A activities fell 33.9% to $205.7 million. The debt market has also seen a 36% drop to $16.4 million. The only division, which has seen a rise in fees, is loan syndication where fee income rose by 53.2% $39.2 million.

Incidentally, for Asia, ex-Japan , the year-on-year decline has been the lowest at 12.4% ($4.3 billion). However, global i-banking fees declined 36.8% while for the Americas and Europe, it crashed 37.5% and 46.2%, respectively.

For the first time, only Indian banks like State Bank of India, ICICI Bank and Kotak Mahindra have reported a rise in their fees for the first six months, dominating the league tables at the first, second and fourth slots, respectively. Their fees have gone up by 264%, 54.5 % and 13.9%, respectively. Foreign players like Merrill Lynch, Citi, Deutsche Bank, Stan-Chart , Goldman Sachs, HSBC and Morgan Stanley have seen a drop in fees of 34.5% to 82.9%.

Last year, i-banking fees from India had crossed the $1-billion mark to $1.39 billion for the first time. Senior bankers feel the number may not cross the $1-billion mark for the full year.

ICICI executive director Sonjoy Chatterjee says, ���Our core fees come from advisory , structuring and syndication desks. Currently, structuring is the name of the game. Most corporates don���t have options which are linked to the equity market .��� He points out that some of the midmarket transactions, where companies used to look at companies much larger themselves, are no longer feasible since no funding available. A tight credit situation in global markets and falling equity markets have seen a dip in deal flows.