Whoever replaces Ian Saines as head of Commonwealth Bank of Australia’s institutional banking and markets unit may have to decide if the bank wishes to aggressively challenge ANZ and Westpac in Australian debt underwriting, even as international investment banks snatch Commonwealth Bank’s equity trading market share.
Between 2010, the first full year of Saines’ tenure as head of institutional banking, and 2012, Commonwealth's ranking and market share among Australian debt underwriters has slipped, according to Bloomberg data.
In 2010 the bank was ranked No. 3 with a 12.4 per cent market share. Last year it was No. 4 with an 11.8 per cent market share as National Australia Bank shunted it aside for the No. 3 position.
ANZ and Westpac have maintained their No.1 and No. 2 ranking respectively over this period and into 2013 in Australian debt underwriting.
Australian debt market issuance, $Abln. Source: Bloomberg
So far this year, CBA’s Australian market share of debt underwriting has improved. But it still trails its three biggest rivals, who have also increased market share. Together the big four banks have a 71 per cent market share of Australian debt issuance, according to Bloomberg.
The competition between the big four Australian banks and their foreign rivals to underwrite corporate Australia’s debt is increasingly fierce.
Fees, usually a percentage of the total money raised on a transaction, have gone from 0.206 per cent in 2009, when Staines was appointed to his current position, to 0.156 per cent this year, according to Bloomberg.
Australian average debt underwriting fees as a percentage Source: Bloomberg
As Australia and New Zealand equity and rights offerings has slumped 76 per cent between 2009 and 2013, many of CBA’s international competitors are making a more of a concerted push into debt underwriting.
Deutsche Bank was only ranked No. 11 in debt issuance underwriting in 2009 with a 3.3 per cent market share. Now the German bank is ranked No. 5 and more than doubled its share to 7.1 per cent.
Similarly, Citigroup was ranked No. 12 in 2009 with a 2.2 per cent market share. The US bank is now No. 7 in Australian debt underwriting with a 5.8 per cent market share.
Wall Street’s largest firms dominate cash equities trading.
In August, Deutsche Bank was No. 1 with a 10.6 per cent market share of ASX and Chi-X trading combined, according to IRESS. UBS was No. 2 with a 10.5 per cent market share and Citigroup was No. 3 with a nine per cent market share. Commonwealth’s August market share was four per cent.
In the 12 months to June 30, Commonwealth Bank's equities trading volume fell 12 per cent compared to the same period a year earlier, according to its annual report. Its market share dropped to 5.2 per cent from 5.5 per cent, the bank says.
Saines’ replacement at CBA will have a challenge on his or her hands.