Cazenove lives it large in ECM

September 24, 2009

Thomson Reuters data on equity capital markets activity over the first 9 months of the year throws up some pretty exciting data if you are a Cazenove shareholder.


Top of the European league table by a country mile sits JP Morgan with $33.5 billion of deals. And that figure incorporates the ECM deals done by JPM’s UK subsidiary (50 percent plus a share) JP Morgan Cazenove. On its own JPM Caz was responsible for $24.2 billion of deals, making it top of the table by some distance. Its nearest rival was Morgan Stanley with $15.5 billion of deals.

This figure has particular resonance because of the possibility that JPM might buy out the Cazenove stake in JPM Caz.

$24.2 billion is a touch under 15 billion pounds. Underwriting fees are about 3.25 percent of value these days. Apply this to the figure and you get to about 480 million pounds. JPM Caz doesn’t get to keep all of this: it has to pay JPM for access to its balance sheet and share fees with other institutions when it sub-underwrites. There are also accountants and lawyers to pay.

A good rule of thumb might be that JPM Caz gets to keep about half the underwriting fees. That suggests that JPM Caz might have earned 240 million pounds from equity underwriting in the first nine months of the year. This figures compares with the 217 million pounds it earned from all corporate finance activities (including M&A fees) in the whole of 2008.

Were the ECM business to keep clanking along at the same rate in the fourth quarter, JPM Caz could be on track to make 320 million in revenues from just this source – not much less than the 350 million pounds the whole firm earned last year. It’s not clear exactly how much of the total revenue ECM accounts for – but somewhere around half might be a good stab.

It all points to 2009 being a very lucrative year for Caz.

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