Commercial Banks Making Strides in Junk Bonds
Ben-Amos, Omri, American Banker
Commercial banks continued to eat into investment banks' share of the junk-bond pie last year.
Seven commercial banks ranked among the top 20 issuers of junk deals, up from five in 1995, according to preliminary yearend data from Securities Data Co. These banks had a combined market share of 18.7%, up from 15.2% in 1995, and 11.9% in 1994.
Bankers Trust New York Corp. was the busiest commercial bank, managing $4.2 billion in high-yield debt to grab seventh place for the year and sixth place for the fourth quarter. Meanwhile, Union Bank of Switzerland and NationsBank Corp. joined the top 20.
Investors said the difference between a high-yield deal led by the relatively new commercial banking entrants and those by the more established investment banking shops was fading.
"That gap is narrowing," said Thomas Haag, high-yield portfolio manager at the Lutheran Brotherhood. As more commercial banks swarm into the securities business, "they're all taking a little bit of market share from the investment banks."
The only noticeable distinction between the two, said Mr. Haag, is that commercial banks tend to be more careful about the risks because they are building reputations, while investment banks have already generated significant goodwill.
Certainly, investment bank continue to dominate the market, sweeping the top six positions. Boutique investment bank Donaldson, Lufkin & Jenrette maintained its grip on the No. 1 spot, issuing 60 junk deals with proceeds of $11.6 billion and grabbing a market share of 15.2%, up 13.1% in 1995.
No. 2 Merrill Lynch & Co. issued nine more deals than Donaldson, but only generated $9.63 billion for a total market share of 12.6%.
Bankers Trust slipped two spots -- from fifth place in 1995 to seventh in 1996 -- despite boosting its total junk volume by 38% to a personal best of $4.23 billion.
Chase Manhattan Corp. also dropped two notches in the rankings, to 10th place from eighth, despite raising $3.47 billion, up 3% from 1995.
"The overall market just got huge this year," said Arthur Penn, managing director at BT Securities, Bankers Trust's underwriting subsidiary. …