Singapore - Bankers earning less

Bankers are making more deals but are earning less, thanks to the global economic turmoil.

Fees from mergers and acquisitions are down from a year ago, and the trend is likely to continue.

Mergers and acquisitions (M&A) activity in Singapore hit its busiest year-to-date volume since 2008.

In the first nine months of 2011, the value of such transactions grew 33 per cent to US$35.2 billion.

But analysts said this increase does not tell the whole story.

Standard Chartered Bank Origination & Client Coverage head Philippe Touati said: “The deal mix has changed.

“Last year, we’ve done bigger deals, and this year, smaller deals. So when you look at the revenue mix, it’s changed from bigger deals to smaller deals… That’s what translates to a fee drop this year.”

based on data from Thomson Reuters, M&A advisory fees here dropped 7.3 per cent to US$375.4 million this year.

Table leader Morgan Stanley saw its takings plummet 20 per cent to US$23.1 million, while second-placed Goldman Sachs recorded a 30 per cent fall in M&A advisory fees to US$17.5 million.

DBS came in third place with US$12.6 million, with a 15 per cent drop in fee revenue.

While smaller deal sizes were largely to blame for the shrinking fees, competition from other financial services providers was also a factor.

Ernst & Young transaction advisory services leader Harsha Basnayake said: ‘There is competition from the boutique corporate finance houses, the accounting firms.

“And a large part of the mid-market transactions that we see in southeast Asian market space – there is a lot of appetite to engage advisors like that.”

These mid-market transactions refer to those involving companies with a market capitalisation of between US$500 million and US$1 billion.

Fees are not likely to rise any time soon either.

Fitch Ratings director for financial institutions Alfred Chan said: “The prospect for advisory fees in 2012 is likely to moderate from 2011, given that volumes are likely to come down.

“The main reason is because of the cautions that most businesses are likely to adopt, given that there are a lot of uncertainties in the global environment.”

Analysts have said banks will be looking to make up for the shortfall in M&A fees from other activities such as underwriting and lending.

Source: CNA

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