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Breakingviews: Commercial banks launch an assault on the brokers

Investment grade debt issuance market share

Source: Thomson Financial

Source: is Europe's leading financial commentary service

Date: August 2003

By Christopher Hughes

The commercial banks' assault on the US debt underwriting market is among the less visible shake-ups caused by the bear market. Some of them are even said to have offered loss-making loans to companies in a bid to win mandates. Yet for all the excitement surrounding bond issuance, underwriting it is a commodity business characterized by poor returns.

At first glance, it looks as if these banks are just taking share for the sake of it.

Three integrated banks - Citigroup, JPMorgan and Deutsche Bank - have made the biggest push into US debt underwriting. Between 1998 and 2002, their collective share of the market rose by 11 percentage points, according to Thomson Financial.

Citigroup made the biggest inroad, lifting its share by six points. The top traditional brokers - Merrill Lynch, Goldman Sachs and Morgan Stanley - have been the main losers. Their collective market share shrank by 10 points. Merrill's alone dropped 5.4 points.

The only broker that significantly improved its position over the period was Lehman Brothers.

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