J.P. Morgan Drops Out of Top 10 IPO Underwriters

"It is absolutely ridiculous to give credence to IPO league table rankings in a year of extraordinarily low volume," said a J.P. Morgan spokesman.

Meanwhile, Citigroup's numbers are skewed by the mammoth $3.5 billion IPO for Travelers Property & Casualty(TAP.A Quote - Cramer on TAP.A - Stock Picks), a subsidiary that Citigroup spun off this year in a deal it largely managed itself.

And J.P. Morgan -- even before the two-year-old merger with Chase Manhattan Bank -- was never known as an IPO powerhouse. Last year it did just four domestic IPOs with a combined dollar value of $561 million.

But still, the drop-off in domestic IPOs is jarring, especially at a time when many on Wall Street are questioning whether it makes sense for J.P. Morgan to continue to claim it offers a full-service investment bank. The poor performance of J.P. Morgan's investment bank is one reason why earnings have fallen so much this year at the bank.

"It always has been a weakness of theirs," said Reilly Tierney, a financial-services analyst with Fox-Pitt, Kelton, who personally owns shares of J.P. Morgan Chase. "But they believe they have to be in the equity business to have a complete product suite."

J.P. Morgan's domestic IPO business endured a big blow when it lost out in the beauty contest to manage the $4.6 billion IPO for CIT Group(CIT Quote - Cramer on CIT - Stock Picks), which Tyco International(TYC Quote - Cramer on TYC - Stock Picks) spun off this year. Goldman and Lehman Brothers were the co-managers of that deal. Some on Wall Street had thought J.P. Morgan would get the deal, since it was the lead underwriter on CIT's initial 1997 IPO.

Tierney said the saving grace for J.P. Morgan in the IPO business is that it still manages to do a respectable job overseas. And as long as that continues, Tierney said, J.P. Morgan executives will argue that they eventually can move up in the underwriting ranks.

Indeed, J.P. Morgan does look a lot better if you factor in its overseas IPO underwriting business. This year, Securities Data reports that the bank, on a worldwide basis, ranks 14th in IPO underwriting compared with a 23rd-place ranking last year. In 2002 the bank has been the lead manager on seven new stock offerings with a combined dollar value of $890 million.

Yet once again, J.P. Morgan ranks well behind Citigroup, the worldwide IPO leader. Securities Data reports that Citigroup has underwritten 44 IPOs worldwide with a combined value of $9 billion.

J.P. Morgan ranks right behind Citigroup in terms of total assets, but in IPO deals, it looks like J.P. Morgan is fielding a minor-league team.