This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Bank Earnings Reveal Lackluster M&A Activity

NEW YORK ( The Deal) -- Investment bank chiefs say there are few indicators of a meaningful recovery in M&A activity, with forecasts of double-digit falls in advisory revenue for the full year.

While J.P. Morgan (JPM - Get Report) chief Jamie Dimon said, in the bank's second quarter earnings call July 12, the market was beginning to open with "a lot of M&A chatter", his CFO Marianne Lake was more circumspect on the strength of any deal recovery.

"What we're seeing and feeling in discussions with clients is that deal activity levels have picked up and may be turning and the pipeline feels a little better and solid but not strong," she told investors.

Greenhill & Co. (GHL - Get Report) CEO Scott Bok noted in its quarterly results this week that a large portion of the advisor's M&A revenue had been driven by completion fees, with lower announcement fees in line with subdued activity levels.

Global M&A activity in the second quarter, with 8,539 deals, was at its lowest since the third quarter of 2005 according to Dealogic. Large-ticket transactions meant deal value at a total $629 billion was only its lowest since late 2012, though advisory revenues took a bigger hit--$3.74 billion-- representing the lowest level since the first quarter of 2010.

"For the full year we expect double digit declines in advisory revenue for the nine large banks that are our primary competitors, with declines growing larger during the second half," Bok said. Advisory league table are largely unchanged for the year to date. For the Americas region, JPMorgan, Goldman Sachs (GS - Get Report) and Bank of America Merrill Lynch (BAC - Get Report) retained their top three positions on the same period last year, with Morgan Stanley (MS - Get Report) trumping Barclays (MS - Get Report) and Deutsche Bank (DB) to round out the top six. JPMorgan does not break out its advisory fees while Goldmans' revenues in financial advisory were slightly higher in the second quarter at $486 million.

Bok said the equity rally and continued quantitative easing had dampened deal appetite, while other M&A heads have noted the appeal of cheap recapitalization as a reason for lackluster activity. The Greenhill chief said potential acquirers were reluctant to make acquisitions while valuations were pricey--with asset inflation via stimulus contributing to this. "When [stimulus] does start to wind down we'll see restructuring activity pick up and companies have more confidence in the market valuations of their targets leading to more M&A," he said.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $12.20 -0.57%
GS $148.25 -0.67%
GHL $23.09 -1.20%
JPM $56.20 -0.60%
MS $22.93 1.15%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs