Bankers bemoan bookrunner inflation trend
Number of banks hired on Asia deals rising; Practice hurts both sides, sources say
Capital markets bankers in Asia are complaining of a new trend threatening their profits: corporate finance issuers are mandating more banks per deal than ever before. According to data provided by UBS, the average number of banks on an IPO of over $1 billion was 2.8 in 2007, 3 in 2008, 4.6 in 2009 and 5.4 in 2010. The trend is apparent in bonds as well: a fine example came on May 4th with the $500 million deal for India’s aptly-named Syndicate Bank, which featured no less than eight bookrunners: Bank of America Merrill Lynch, Barclays Capital, Citi, Deutsche Bank, HSBC, J.P. Morgan, Royal Bank of Scotland and Standard Chartered. While Indian borrowers are somewhat notorious for mandating as many banks as possible on their fundraising transactions, bankers now say the practice is spreading to other countries in the region. It is noticeable among Chinese state-owned issuers, sources say, but is not limited to that sector:
“We were disappointed by the number of firms that ended up working on ABC [The IPO of Agricultural Bank of China in July],” says a senior banker who worked on the deal, “in as much as it made the logistics of meetings difficult and cut into fees.