Magazine article American Banker

Morgan Inches Up in Underwriting Ranks

Magazine article American Banker

Morgan Inches Up in Underwriting Ranks

Article excerpt

Morgan Inches Up in Underwriting Ranks

On the face of it, impressive gains in the first half of this year failed to bring J.P. Morgan & Co. much closer to its goal of becoming a major player in the securities underwriting business.

Though Morgan increased its volume of underwriting activity by more than 68%, to $4.8 billion, it moved up only one notch in the overall rankings, to No. 11 among lead underwriters.

Other firms chalked up big gains too, so the gap was as wide as ever between Morgan and the bulge-bracket firms - those that account for the bulk of total underwriting volume.

Kidder Peabody's Competition

For example, sixth-ranked Kidder Peabody & Co. led 69 deals totaling $21.4 billion. In the first half of last year, Kidder led 40 deals totaling $8.5 billion.

However, about $18 billion of Kidder's underwriting volume was accounted for by mortgage-backed deals.

"That's not third-party underwriting," said Joseph Cook, a managing director at J.P. Morgan Securities Inc., the securities underwriting arm of J.P. Morgan.

When both firms' mortgage-backed deals are excluded, the gap between Kidder and Morgan virtually disappears.

Bulge-Bracket Move Promising

Indeed, Mr. Cook said, if all mortgage-backed deals are excluded in the underwriting volumes, Morgan ranks seventh among lead managers, making a leap to bulge-bracket status a less daunting prospect.

In mortgage-backed deals, firms mainly buy packaged mortgages from Fannie Mae and Freddie Mac - the quasigovernmental agencies - and repackage them as collateralized mortgage obligations for the secondary market.

As such, underwriting firms are not raising capital for a third party, noted Mr. Cook in explaining Morgan's rationale for excluding these deals from the underwriting volumes.

In all, the volume of new debt and equity issued in the domestic market soared almost 59% to $261. …

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