City banks head for £1 billion fees bonanza

CITY firms are set to land a £1 billion fees bonanza from helping top businesses survive the Covid crisis by raising emergency cash from investors.

Figures just out from Dealogic show that since the pandemic began in late March, there have been 95 deals of over £50 million that saw banks get cash to companies via rights issues.

They raised nearly £27 billion in total, on which the banks, brokers and lawyers will make an estimated £550 million.

That £27 billion is up 35% on the same period a year ago.

Bankers say the flood of deals will grow between now and the end of the year, especially given fresh market wobbles today on news that President Trump and his wife are now sick.

Fees of more than £1 billion are now expected by analysts in what will be a bumper year for banks – and banker bonuses.

Russ Mould of AJ Bell said: “That should turn into bonuses, especially for the rainmakers/dealmeisters. That might not be a great public look, if unemployment rises and the pressure is still on from regulators to preserve capital.”

Yesterday, Rolls-Royce unveiled a £2 billion right issue that should help secure the future of one of Britain’s most important engineering companies.

Banks will get fees of £80 million for securing the funds.

Today London venture capital firm Draper Espirit confirmed plans to raise £100 million to invest in digital deals.

City brokers such as Panmure Gordon and TP-ICAP are due to report earnings figures soon, as are big banks such as Barclays.

City broker Numis has already reported, telling of revenues “significantly higher than the first half. Investment Banking benefited from an increase in both deal volumes and average deal fees, whilst Equities broadly repeated the strong performance achieved in the first half”.

David Buik at Aquis Exchange says “I think the picture has been positive, if a little mixed,” he said.

“There is no doubt that wealth management and trading equities and bonds and the issuance of bonds has been gangbuster in NY, London, Europe and the Far East. You only have to look at the numbers last quarter from Goldman. Morgan Stanley, Citibank, JP Morgan, Credit Suisse, UBS and to some degree Deutsche and they will be reflected when they post numbers again later this month.”

M&A activity has also been strong. There were $456 billion worth of deals in the third quarter, the highest on record. These will also have generated big fees for City banks, though the bulk will have gone to the giant Wall Street players.