That reflects a quieter year for mergers and acquisitions after a record 2021 and a slump in initial public offerings, which weighed on overall equity capital markets activity.
Bankers at Wall Street-based banks are typically informed of their bonuses in the first few weeks of the calendar year, while European banks tend to be told in late January and February.
Macquarie Group has a March 31 year end and its bonus season comes in May.
Goldman Sachs set the tone globally for the industry with speculation filtering through the market that bonus cuts would be steep, with the investment bank confronting average reductions of about 40 per cent. Again, that comes off bumper levels of pay last year when
M&A was booming and staff retention was a theme.
The head of one investment bank told this column: “I expect it will be tough (bonus season).”
Job cuts have also been a feature at many firms in recent weeks as they seek to preserve the bonus pool for a smaller banker cohort.
While average total pay is expected to be down 20 to 30 per cent, the outcomes in different business units will vary widely.
“Equity capital markets will be hit pretty hard, but equities (trading) still had solid volumes and fixed income is up,” the head of another investment bank said. “Trading businesses should have had a pretty good year.”
In Refinitiv’s Australian league tables, UBS leads on the biggest 2022 estimated investment banking fee haul with $US176.9m ($262m) as at December 21, followed by ANZ raking in an estimated $US139.5m.
For M&A – across domestic, inbound and outbound deals – Barclays/Barrenjoey is in top spot advising on transactions worth $US43.2bn, followed by Goldman with $US40.1bn.
In equity capital markets, where totals were sharply down, UBS is ranked No 1 with transactions of $US3.2bn, followed by Macquarie with $US1.8bn.
Bankers canvassed by this column reported fierce competition this year, with some firms even allowing companies to pay them fees at their discretion to win the work.
It was a dire year for equity capital markets with total proceeds raised falling to their lowest in 20 years. Refinitiv data showed raisings amounted to $US17.4bn, a 58.6 per cent drop on 2021 and the lowest year since 2002.
Local companies raised just $US614.2m via IPOs, down a whopping 92.7 per cent on last year. Secondary raisings totalled $US16.2bn, down 47.4 per cent cent versus 2021.
In debt capital markets, primary bond offerings from Australia-based issuers raised some $US159.9bn for the year as at December 21, a 6.3 per cent increase compared to 2021.
Australia M&A activity – across domestic, inbound and outbound deals – fell 63 per cent to $US142bn as at December 21, after last year marked a record deal-making period.
This year six mega-deals above $US5bn have been announced, with Refinitiv putting the cumulative total at $US54.2bn.
Among those is the $9.6bn takeover of OZ Minerals by resources giant BHP, where parties locked in terms on Thursday, subject to an independent expert report prepared by Grant Samuel.
Overall deals involving Australian targets fell 60.3 per cent as at December 21 compared to last year. The busiest sector for deals was energy and power which has accounted for 25.1 per cent of annual activity.
It’s been a tough year but excluding last year’s record M&A activity and a Covid-19-impacted 2020, 2022 was a robust period for takeovers. This year’s announced activity has come in stronger than 2019 and just shy of 2018 levels.
Share trading volumes were boosted by higher levels of volatility, but that has worked against any recovery in the IPO market.
Bankers and lawyers will be hoping 2023 brings even more activity, despite an expected slowdown in economic growth. Next year will also provide a clearer reading on the health of newer investment banking players in Australia including the likes of Barclays/Barrenjoey and Jarden. Rivals will be closely watching how many mandates the newcomers are winning and whether they can sustain their respective cost bases.
CEO hunt
Bank of Queensland has executive search firm Heidrick & Struggles scouring this and other markets for chief executive candidates to replace ousted boss George Frazis.
Given the time of year, it’s likely to be some weeks before the process ramps up. The Brisbane-based lender parted ways with Mr Frazis last month, with immediate effect, citing a change in focus as the economy slows and it seeks to recalibrate its growth and risk management settings.
BOQ chairman Patrick Allaway became executive chairman as a search for the bank’s next CEO got under way.
Funding update
Lender MoneyMe has revised its agreement with corporate debt provider and private equity firm Pacific Equity Partners. It includes new covenant settings and the early repayment of $25m, plus associated costs, of a senior-secured facility that was drawn on to help fund the purchase of SocietyOne earlier this year. The repayment means the facility is restored to its original size of $50m.
MoneyMe has Morgan Stanley advising the company on a competitive process to identify “new capital solutions”, and is targeting an announcement on that topic by the start of the June quarter.
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The 2022 bonus haul for 2022 at investment banks in Australia will be markedly slimmer, with consensus pointing to average cuts locally in the order of 20 to 30 per cent in total compensation.