In the ECM/DCM world, China is driving global IB revenues on that front because there are still quite a few companies that aren’t public yet, while many large and well-known US/European companies are already public. For instance, the recent Agricultural Bank of China IPO was the largest IPO in the world, even though ABC forced a 30% cut in IPO bank fees and withheld nearly $50m of the pool to pay “incentive” fees that it will allocate based upon how it thinks IBs have performed. This will likely be the upcoming trend given the increasing bargaining power of Chinese companies. http://www.ft.com/intl/cms/s/0/9e6bb830-90ff-11df-b297-00144feab49a,s01=1.html#axzz1eWZ8DXzE

In regards to Chinese banks doing IPOs for less, there’s always the appeal of having a global bookrunner involved in a deal (i.e. a Morgan/Goldman) vs a local bookrunner (i.e. a Citic) because a global bookrunner has access to institutional investors worldwide and has better brand name than local bookrunners, esp if the company is looking to issue on international exchanges. Furthermore, if you have dealt with the various bookrunners, some global bookrunners do offer work of higher quality though whether they act in the company’s best interest or not is another question

On your comments re banks undercutting fees, we’re starting to see alot of that in Asia, especially China and India where upcoming banks and boutiques are flooding the market.

Do an APAC IPO league table run and you’ll see a lot of Chinese names popping up on the top 10 list. These are investment banking arms backed by huge commercial/consumer banking machines. Try getting on a deal with them, you’ll fully realize the term “smiling assassin”.

In HK/SG, an IPO fee is 2.5% if you’re lucky. The Chinese banks would happily do it for less. (They have an army of relatively low-paid, paper-pushing “bankers”) You’d be lucky to get a 1% fee on Indian deals.. That’s a whole different animal right there.

So yeah.. it’ll be interesting to see how things pan out in the ibanking industry over the next few years.

What is your thought on this?