Goldman Sachs is new No. 1 in investment fees

Citigroup had been leader in advice, underwriting

February 03, 2004|By BLOOMBERG NEWS

NEW YORK - Goldman Sachs Group Inc. toppled Citigroup Inc. last year from its year-long perch as the No. 1 investment bank in collecting fees for advice and underwriting stocks and bonds. Goldman Sachs is in the lead this year, with $239 billion in mergers yet to be completed.

Goldman Sachs' fees from winning the highest-paying investment banking projects rose 25 percent last year to $2.5 billion, according to Freeman & Co., a New York-based consulting firm. Fees at Citigroup, the world's biggest financial services company, rose 2.8 percent to $2.38 billion.

Under Chairman and Chief Executive Officer Henry M. Paulson Jr., 57, Goldman Sachs has relied on relationships with clients such as Sears, Roebuck and Co. and Bank of America Corp. to reclaim fees lost in 2002 to Citigroup and J.P. Morgan Chase & Co. Citigroup garnered the most fees in 2002, as its lending prowess persuaded CEOs to award it the most lucrative assignments.

"Corporate chieftains once again are dealing with traditional investment banks on perceptions of superior expertise," said Michael Stead, who helps manage $132 billion at Wells Fargo & Co., including 6.2 million Citigroup shares and 1.1 million Goldman Sachs shares. "Access to debt financing isn't as critical now and last year as it was in 2002."

When fees from syndicated loans, underwriting asset-backed and mortgage-backed securities and initial sales of closed-end funds are included, Citigroup is in first place with $3.57 billion. J.P. Morgan Chase was second, with $3.23 billion in fees, and Goldman Sachs was third with $2.89 billion.

Fees at Morgan Stanley, the second-largest securities company by capital, jumped 13 percent last year, sending the bank to third place from fifth in 2002, according to Freeman & Co., whose clients include Zurich-based UBS AG and Merrill Lynch.

Fees at UBS jumped 33 percent to $2.09 billion last year as the bank rose to fourth place from seventh in 2002. Much of the increase came from its expansion in the United States.

Citigroup's was the top fee earner in underwriting stocks and bonds and selling merger advice in 2002, the slowest year for the issuance of equity and equity-linked securities since at least 1999.

It charged higher fees and earned more than Goldman Sachs in equity transactions in 2002, pulling in about $1.38 billion in fees on $39.8 billion in deals, compared with Goldman Sachs' $1.23 billion in fees on $42.2 billion in deals, Bloomberg data shows.

Last year, Goldman Sachs earned about $1.5 billion in fees on $41 billion in deals, compared with Citigroup's $1.3 billion in fees on $44.9 billion in deals, according to Bloomberg data.

In 2002, Citigroup did the most initial public offerings, the most lucrative part of the underwriting market, which generate as much as 7 percent of the value of a deal for bankers. It had $10 billion in IPOs and a 17.6 percent market share. Goldman Sachs ranked second with a deal tally of $5.6 billion and a 9.7 percent share.

The two reversed positions last year, with Goldman Sachs seizing an 11.4 percent market share on about $6 billion in transactions and Citigroup coming in second on $3.9 billion of deals and a 7.4 percent market share.

The market in the United States for IPOs last year was the worst since 1990, said Jay Ritter, a finance professor at the University of Florida who studies stock sales.

Citigroup overtook Merrill Lynch as the leading U.S. bond underwriter in 2001 and has retained that spot. J.P. Morgan moved to second from third in 2002, and Merrill Lynch slipped to fifth place, where it remained last year. Goldman Sachs improved its ranking last year, rising to sixth from seventh, with $50.3 billion in bond sales.

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