Reparation Time

1st October 09 – Reparation time

The anniversary of the collapse of Lehman Brothers seems to have cemented the surge in equity markets to a degree that company boardrooms plus advisors are hell-bent on repairing their balance sheets. A secondary influence is the ongoing squeeze of bank lending (see yesterday’s statistic on bank deposits with the B of E). The reparation is taking the form of rights issues and share placings. In one 48 hour period, no less than £3bn was gleaned from investors.

Overall, some £60bn has been raised in the UK market this year or is imminent. In order of magnitude the repairers are:-

• HSBC bank

• Rio Tinto mining

• Lloyds Banking Group bank

• Wolseley plumbers merchants

• Standard Chartered bank

• Liberty International property

• Songbird property

• Land Securities property

• British Land property

• 3i Group investors

• Barratt builders

• Hammerson property

• Yell media

• Redrow builders

Quite a list and highlighting the sectors worse hit particularly banks and property related (11 out of the 14).

But it is an ill wind. Guess what. The banks that advised and underwrote the cash call for just one of the above, namely Barratt, including HSBC, Lloyds Banking Group and RBS will collect £27m in fees. And, according to research from Thomson Reuters, banks have billed £455m in fees from the top 20 UK deals this year. Underwriting fees on right issues (was underwriting really necessary given the heavy discount to current share prices?) have increased from 1.5% to circa 4% before being passed on to sub-underwriters at about 1.75%.

Bank competition aint wot it used to be.