The Strategist

US, EU investment banks to make a record profit on deals with Chinese securities

12/18/2020 - 10:30

By the end of this year investment banks may receive record commissions for transactions with Chinese securities, writes Financial Times, referring to the data of analytical company Dealogic.

Scott Brown
Scott Brown
According to the company’s calculations, since the beginning of the year such commissions of investment banks not based in China have already grown by 113% compared to last year and reached $ 1.73 billion. It is most likely the record of 2010 will be reached for the year as a whole ($ 1.77 billion).

This strong performance was driven by record trading in Chinese equities on exchanges in Mainland China, Hong Kong and New York. Among other things, record IPOs and SPOs of Chinese companies have helped raise a total of $132.3bn, which represents 38% of the global market for such offerings. Major Chinese offerings included the IPO of JD Health, the healthcare division of online retailer, which raised $3.4bn, and the $2.4bn IPO of fintech service Lufax. 

It was a record year even despite the cancelled IPO of the financial service Ant Group: it was expected to raise $34.4bn, which would have made the offering a record, with investment banks expected to earn at least $300m on it. Overall, the MSCI China index of major Chinese companies rose 24% for the year compared with 14% for the US S&P 500.

The top four places in terms of earnings from such commissions went to US banks, a sign of the growing relationship in this area between Chinese and US companies, despite the trade conflict and other foreign policy frictions. Goldman Sachs earned the most from commissions on Chinese equities transactions - $382m, up 220% on 2019. Next are Morgan Stanley ($346m), Bank of America ($197m) and JP Morgan ($166m).