Banking & Finance Investment banks enjoy fee windfall from debt issuance By Matt Smith October 23, 2024, 4:06 PM Alamy/Hasan Zaidi via Reuters Central Riyadh. Of total Mena investment banking fees, 45 percent were generated in Saudi Arabia Fees in Mena region up 74% Highest nine-month total this century $150bn estimate for 2024 issuance Investment banking fees on bond and sukuk issuance in the Middle East and North Africa (Mena) have surged this year as governments, corporations and commercial banks raise increasing amounts of debt to meet their funding needs. Mena debt capital market underwriting fees in the first nine months of 2024 rose 74 percent year on year to $338 million, which is the highest nine-month total this century, a report by London Stock Exchange Group (LSEG) reveals In debt capital market underwriting, banks help entities such as governments and corporations issue debt, buying these bonds and sukuk – sharia-compliant bonds – from the issuers and selling them to investors. Equity capital market underwriting is similar, with banks helping companies raise money through selling shares. In both instances, the banks receive an underwriting fee for taking on the risk that some of the debt or shares will not be sold. Typically, banks also generate revenue from the spread between the prices at which they buy from issuers and sell to investors, as well as management fees for coordinating the issuance process. Investment banking fees are confidential and so the LSEG numbers are estimates, although investment banks themselves place high importance on fee league tables as they vie with competitors for work. GCC bond and sukuk issuance topped $116 billion from January to early September 2024, up from $87 billion for full-year 2023 according to Franklin Templeton research based on Bloomberg data. In September, Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital, told AGBI that 2024 total Mena debt issuance should near $150 billion. Similarly, Emirates NBD Capital, the investment banking division of Dubai’s top bank Emirates NBD, completed 92 bond or sukuk transactions from January to early October, a senior executive told AGBI earlier this month. That compares with 45-50 in 2023. In terms of issuer type, around 10-15 percent of the bonds Emirates NBD Capital has completed this year were for sovereign and quasi-sovereigns, 35 percent were for corporations and 50-55 percent were for banks. Mena investment banking fees totalled $1.04 billion in the nine months of 2024, up 27 percent versus a year earlier according to LSEG estimates. This is also the fourth-highest nine-month total since LSEG’s records began in 2000 and only the second time since 2008 that such revenue exceeded $1 billion; the other occasion was in the first nine months of 2022, LSEG data shows. Investment banks in Mena generate most of their revenue through four major services: debt capital market underwriting, equity market underwriting, syndicated lending and mergers and acquisitions advisory. In the first nine months of 2024, equity market underwriting fees were $261 million, up 56 percent year on year. Over the same period, syndicated lending fees grew 12 percent to a two-year peak of $273 million. Egypt plans bonds drive and may review IMF measures Maldives nears first sovereign default on Islamic bonds US rate cuts will help Gulf bonds but oil worries persist Nine-month mergers and acquisitions advisory fees fell 20 percent to a six-year low of $166 million, however. Of total Mena investment banking fees, 45 percent were generated in Saudi Arabia and 38 percent were generated in the UAE. From a global perspective, Mena fees achieved the biggest nine-month percentage increase, while the Americas was second with a 21 percent rise to $46.2 billion.
