Every crisis is an opportunity for someone. The pandemic has been catastrophic for many small businesses, but many large businesses, particularly in Tech, have thrived. Who else did well? Their bankers.
Things looked bleak when credit markets froze in Feb. But after central banks came to the rescue, corporations raced to raise cash and lock in cheap long-term funding. According to the FT, companies raised a record $5T of debt in 2020. It was a robust year for equity offerings as well, with more than $300B raised through IPOs and secondaries. And all that debt and equity underwriting generated record fees for global banks--$125B worth!
The five largest US banks account for ~30% or $37B of the year's total investment banking fees. That haul should mean a very merry bonus season, at least at GS and MS. The other three firms all have big commercial banking arms and will need to set aside extra reserves for potential loan losses that have put pressure on their stock prices: the KWB Bank Index is down 14% YTD. All that reserving could shrink some of the rainmakers' pay at JPM, BoA and Citi...but probably not by much (if one bank pays well, everyone else dutifully follows). So expect Manhattan real estate to pick up again in February!
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