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A dizzying recovery in financial markets this year has upended the usual pecking order for fee-making in investment banking and turned the bonuses flowing from those fees into political dynamite. For the first time in at least a decade, bankers advising on share and bond sales have taken a bigger slice of advisory fees than colleagues in mergers and acquisitions (M&A), as banks and other companies scrambled to shore up balance sheets.
-- J.P. Morgan tops equity and debt capital markets tables
-- Goldman top for M&A
-- Investment banking fees fall to $69.5bn, five-year low
"The shape of the fee pool has really changed materially over recent years," said Simon Warshaw, co-head of investment banking for Europe, the Middle East and Africa (EMEA) at Swiss bank UBS, ranked fifth for global equity capital markets (ECM) issues and fees this year.
"2009 has been first and foremost a year of equity recapitalisations and debt capital markets (DCM) activity, with M&A almost completely off the agenda in the first half," he said. The biggest beneficiary of this shift has been J.P. Morgan Chase & Co, under chief executive Jamie Dimon and new investment banking head Jes Staley. J.P. Morgan has advised on more bond and share issues than anyone else, for which it earned an estimated $3.8 billion.
Bank of America Merrill Lynch ranked second for fees in both categories. The fee estimates, by Freeman & Co using Thomson Reuters data, focus only on the core investment banking areas of advice on equity and debt issues, M&A and loans. They do not cover other areas such as trading of fixed income, currencies and commodities (FICC) that have proven extremely lucrative for banks and brokers this year.
The spectre of bumper payouts for bankers so soon after the financial system neared collapse has sparked a backlash. Across the City, London's financial district, bonuses are set to hit 6 billion pounds ($9.8 billion) this year, according to Centre for Economics and Business Research (CEBR) estimates - up 50 percent from 2008 but below 2007's record 10 billion.
And in the United States, Bank of America, Citigroup Inc, Goldman Sachs, J.P. Morgan, Morgan Stanley and Wells Fargo & Co set aside a total of $112 billion for salaries and bonuses, including deferred payments, in the first nine months of 2009, according to the New York state comptroller.
While the Group of 20 (G20) nations has agreed bonuses need to be structured to discourage excessive risk-taking, Britain has gone further, imposing a one-time 50 percent tax on bonuses above 25,000 pounds ($41,000). Experts have said many banks will simply pay the extra tax to hold payouts steady.

Copyright Reuters, 2009

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