IB Fee Pool Seen Stable: Bankers

Investment banking revenue is down from one year ago, but not so much that catching 2011’s total fee haul is impossible. With fees charged for deals relatively stable from last year, bankers say volumes will be more of a driver for their revenue than anything, and diversification away from Brazil is becoming more and more important. A strong September and October in DCM and ECM would help the picture the most. “The only fee base that came down [this year] was ECM,” Guilherme Paes, head of investment banking at BTG Pactual, tells LatinFinance. DCM fees are the same, he says, and M&A fees are stable and still attractive. At $1.04bn through August 24, the regional revenue total from M&A, loans, ECM and DCM is down versus the $1.38bn in corresponding period in 2011, according to Dealogic. BTG led the overall league tables in the region through August 24, with $114m, or 10.9% of the total pool. The bank was also at the top of the M&A table, with $75m, and the ECM table, with $26m. In ECM, fees have been affected by a greater number of banks per transaction, as well as many deals not resulting in full fees due to lower-than-expected pricing. In lean times, local markets can also help. “DCM and M&A markets continue to be much better than last year due to the fees coming from local markets. The local markets are very strong, and always open,” Paes says. Issuance and M&A activity, and the accompanying revenues, should still be dictated by global economic conditions, and news from the US and Europe. While Brazil still accounts for most of the region’s business, bankers stress the need to diversify revenue streams away from Brazil and into growing markets including Peru, Chile, Colombia and Mexico. “The revenue base is more affected by Brazil. LatAm ex-Brazil is probably flat, but given the size of Brazil, the overall level is down,” Javier Vargas, Co-Head of Investment Banking for Latin America at Credit Suisse, tells LatinFinance. “Investors are a bit more careful about Braz