Markets & Finance

Citi, Stanbic parent ahead in deals fees

CFC

Standard Bank was one of the joint lead managers for Kenya’s $2 billion Eurobond. PHOTO | JENNIFER MUIRURI

Standard Bank of South Africa (Stanbic) and Citi took the largest cut from investment banking fees in Africa last year, partly aided by mega deals such as Kenya and South Africa sovereign bond issues.

Estimates compiled by Thomson Reuters and Freeman Consulting, however, show that the total fees for investment banking services in sub Sahara Africa stood at Sh30.8 billion ($338.9 million) in 2014, a nine per cent drop from 2013.

The Standard Bank saw its share of the fees rise by 27 per cent between 2013 and 2014 from $20.9 million to $26.58 million (Sh2.4 billion), pushing it up to second from the fourth position amongst top earners.

Top ranked Citi’s fees rose by 15.3 per cent in 2014, to $29.8 million (Sh2.7 billion) from $25.8 million. The US lender was third in 2013. Goldman Sachs, which topped the list in 2013, was not among the top 10 in 2014.

Standard Bank (the majority shareholder of CfC Stanbic Bank) was the mandated lead arranger, alongside South African lender Nedbank and the African Development Bank (AfDB), for the Sh70 billion (€623 million) 310 megawatt Lake Turkana wind power project in northern Kenya.

“Sub Saharan African (SSA) debt issuance reached $18.7 billion during 2014, 10 per cent less than in 2013, although still the second highest annual total since our records began in the 1970s,” said Keith Nichols, Thomson Reuters managing director for Africa.

“Equity and equity-linked issuance in SSA totalled $6.7 billion in 2014, almost double the value recorded during 2013 ($3.5 billion) and the highest annual total since 2007.”

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Two-thirds of 2014 annual fees were earned during the second half of the year. Standard Bank, the largest African bank by assets and earnings, was also one of the joint lead managers for Kenya’s $2 billion Eurobond issue in June 2014 and in the reopening of the bond in November, alongside QNC Capital, Barclays Bank Plc and JP Morgan Securities.

Barclays was ranked third in total fees earned last year at $23.54 million.

Citi was one of the joint book runners for South Africa’s $1.65 billion sovereign bond issue in July.

Local banks have often been left out of the mega deals, unable to compete due to their relatively low capitalisation levels.

Local investment banks have also been unable to compete with their multinational rivals on the continent, let down by among other things lack of skilled talent required to handle the often complex deals.

According to Thomson Reuters, the bulk of the investment bank fees earned last year came from syndicated lending fees (up eight per cent) and equity capital markets underwriting (up 22 per cent) at $123 million and $112.4 million respectively.

Completed mergers and acquisition transaction advisory fees fell 22 per cent to $64.2 million, while debt capital markets underwriting fees fell 53 per cent to $38.6 million.