JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are extending their dominance in underwriting equity offerings — helped by sales of financial companies' shares, including their own.
The three banking companies together control 42% of the global market so far this year, according to data compiled by Bloomberg News. This is up from a 30.7% share for the three top underwriters in the first six months of 2008 and the biggest concentration for any first half in at least a decade.
"Those three firms have weathered the crisis better than anyone," said Charles Geisst, a finance professor at Manhattan College in New York and author of a history of Wall Street. "In this market, companies will go looking for an underwriter whose financial position is better than others."
Banks have sold about $73 billion of stock worldwide this year, excluding rights offerings, and this accounts for 37% of the world's $196.9 billion of equity issues, the data shows. More than $43 billion of the total was by U.S. banks, partly in response to government stress tests or to meet requirements for repaying funds from the Troubled Asset Relief Program.
The U.S. sales include $5.76 billion raised by JPMorgan Chase, equal to 19% of its 2009 equity sales; the $6.92 billion offered by Morgan Stanley, or 27% of its total, and Goldman Sachs' $5.75 billion, or 22%.
The biggest bank sale was an $8.82 billion offering by Japan's Sumitomo Mitsui Financial Group Inc. on June 15.
In addition to dominating equity underwriting, the three U.S. companies rank as the world's top advisers on mergers and acquisitions, according to the data.
The gains came after Goldman Sachs and Morgan Stanley, the two biggest U.S. securities firms, converted to bank holding companies in September amid doubts about the future of a model that combined advisory work with trading and lending. JPMorgan Chase was the only one of the five largest U.S. banks to avoid reporting a quarterly loss during the 19-month-old economic slump.
Even without selling their own shares, the three banking companies tightened their grip on the equity underwriting business as clients stayed with proven bankers after last September's collapse of Lehman Brothers Holdings Inc. They achieved this standing under the CEOs James Dimon at JPMorgan Chase, Lloyd C. Blankfein at Goldman and John J. Mack at Morgan Stanley.
JPM's market share, excluding its own offering, rose to 14.8% this year from 11.7% the year earlier, the data showed. Goldman Sachs' share grew to 11.1%, from 8.1%.
"We've seen continued growth in market share as clients look for comprehensive advice and execution across the capital structure," Kevin Willsey, the head of equity capital markets for the Americas at JPMorgan Chase, said in an e-mail.
JPM earned about $910 million on selling stock in the first half, up from about $710 million a year earlier, the data shows. The figures exclude self-led deals and rights offerings and are based on average global fees.
Goldman Sachs made about $680 million, compared with $490 million the year earlier. Morgan Stanley's fees on equity sales in the first half jumped to about $670 million, from $480 million the year earlier.