Investment banks earn record $104bn advising on takeovers

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Investment banks earned a record of nearly $104bn (£76.7bn) in fees globally last year from work advising companies on more than $3.5tn worth of takeovers and mergers.

Globally, banks billed their clients for $103.9bn worth of fees for their work, a 16% increase on 2016 and the highest yearly total since Thomson Reuters began collating data in 2000.

Bankers in the UK charged clients $5.8bn, a 17% increase on 2016 as the collapse in the value of the pound following the Brexit vote made British companies cheaper targets for overseas buyers.

The soaring fees came from work on $3.5tn of takeover deals last year, including Rupert Murdoch’s sale of most of his 21st Century Fox empire to Disney in a $66bn deal and Amazon’s $13.7bn acquisition of the organic food chain Whole Foods. It was the fourth consecutive year that global dealmaking has exceeded $3tn, and bankers expect even more deals in 2018 according to the analysis published on Thursday.

“There was a fair amount of [mergers and acquisitions] activity last year, on top of which rising interest rates in the US probably prompted lots of global firms to pick up the phone to their investment bank to see what they should be doing to protect their assets and operations, and whether to raise more capital before the era of cheap money draws to a close,” said Laith Khalaf, a senior analyst at the stockbroker Hargreaves Lansdown.

“The backdrop of rising equity markets and an improving global economy will no doubt have added some gusto to proceedings too. Ten years after the financial crisis the global banking system is beginning to show signs that it has healed and is now in a position to support economic activity from a position of greater strength.”

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The Wall Street giant JP Morgan charged $6.7bn in fees alone last year. The bank, which paid its chief executive, Jamie Dimon, $28m last year, was the top charging bank in the US and Europe and collected 16.4% more money than in 2016. JP Morgan is expected to report record profits when it publishes it full-year results next week. Goldman Sachs charged the second highest fees, raking in $5.9bn, a 14% increase on 2016.

The two US banks were also on Thursday revealed to have rewarded their 1,396 UK-based investment bankers with average annual pay of $1.5m (£1.1m) in 2016. JP Morgan paid 672 staff in senior or risk-taking positions a total of $1bn, while 724 Goldman bankers were paid an average of $1.48m, according to calculations by Reuters.

Ten Goldman bankers in the UK earned more than €9m, while 14 JP Morgan executives took home more than €5m – its highest published pay bracket.

The banking fees and pay figures were published on “Fat Cat Thursday”, the day on which the average FTSE 100 chief executive’s pay so far this year overtakes the average annual pay of UK workers.

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Powered by Guardian.co.ukThis article was written by Rupert Neate Wealth correspondent, for theguardian.com on Thursday 4th January 2018 17.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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