Commercial banks held on to their share of the initial public offering market in the second quarter by leading 48 deals that raised $3.68 billion.
Overall, banks led 16.5% of the quarter's nearly $25 billion of initial public offerings, down slightly from their 17.2% share in the first quarter and 16.7% in the second quarter of 1998, according to Thomson Financial Securities Data.
But even by just maintaining share, commercial banking companies-led by Deutsche Bank, BankBoston Corp., and Citigroup Inc.-saw their business expand compared with the year earlier.
Though the number of IPOs dropped 13.9%, to 223, in the second quarter, from 259 in the first quarter, the funds raised by IPOs jumped 29%, to $24.7 billion-largely on the strength of vast sums raised for Internet companies.
Andrew Wilson, co-head of equity capital markets and syndicate at J.P. Morgan & Co., said that had it not been for the "Internet miracle" the quarter would have looked markedly different.
"That's the real hot button," Mr. Wilson said. "Of course during the quarter people's views of the tech sector changed. And that, combined with worries about interest rates, created volatility."
However, the most sought-after and well-received deal of the quarter was not for an Internet company; it was the $3.65 billion IPO for Goldman, Sachs & Co., the firm that, coincidentally, was the quarter's leader in equity underwriting.
Despite the consistent showing of commercial banks, only five U.S.-based banking companies were ranked among the top 20 underwriters in the second quarter: Bank of America Corp., BankBoston, Citigroup, J.P. Morgan, and U.S. Bancorp.
Ronald L. Mandle, an analyst at Sanford C. Bernstein & Co. in New York, said major U.S. banks do not have to beat investment banks in the IPO arena. But they do need to be in the business.
Though the business is profitable, the ability to do equity underwriting is not considered an earnings driver for banks. But having the capability is becoming a necessity in order to serve corporate customers, Mr. Mandle said.
"If you want to provide complete product lines, you need equity capability," he said. "It's part of a repertoire that's becoming ever more important."
One banking company with that capability, J.P. Morgan, is touting its equity underwriting skills as the reason it was able to get substantial business from Lyondell Chemical Co. in Houston.
J.P. Morgan led a $7 billion bank financing for the oil company in 1998 and, in the second quarter, a $3.4 billion junk bond issue and a $165 million equity issue.
Morgan's Mr. Wilson said equity capability not only has been a boon to the company's relationship with Lyondell but also with leveraged-buyout shops, mergers and acquisition firms, and financial sponsors.
All these companies are among the most desirable clients on Wall Street because they generally need the products that generate the highest fees.
And having broad product capability allows corporate customers to feel more at ease with financing proposals, Mr. Wilson said.
"When you have a bank financing or equity market debate" with those firms, he said, "we have the expertise and know the market will react a certain way."