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League Tables Point to Bookrunner Shakeout
Asset Backed Alert, Harrison Scott Publications Inc. (June 27, 2008)

A year after the structured-finance market entered its worst-ever downturn, it has become increasingly apparent which banks still want to be major players in the business - and which ones don't. Just as they were a year ago, Citigroup and J.P. Morgan are the world's most-active underwriters of asset-backed securities, residential and commercial mortgage bonds and CDOs heading into midyear 2008, according to preliminary information from Asset-Backed Alert's ABS Database. Deutsche Bank and RBS Greenwich also appear to be holding on to top-five rankings.

But Barclays, Credit Suisse, Goldman Sachs, Merrill Lynch, Morgan Stanley and Wachovia have seen their standings in the underwriter league table plunge since mid-2007, in some cases by design. Investment banks across the board have spoken of trimming the resources they dedicate to structured-product underwriting. But quantifying the depth of those cuts has been difficult. That task has been made harder by the fact that overall deal output has slowed dramatically, meaning even the institutions that intend to remain active are handling far fewer deals than they were at this point in 2007. To paint a clearer picture, it helps to compare the degrees to which the banks have risen or fallen in the standings.

Citi, for instance, has dismissed a wide swath of structured-finance staffers along with thousands of other employees in recent months, responding to some $35 billion of credit-crunch-related writedowns on holdings of various debt products - many of which it took on in its role as an underwriter. More markdowns are expected.

That might suggest a pullback by Citi. But the bank has still run the books on more structured-finance transactions than any of its peers this year, to the tune of about $35 billion. In fact, it looks like Citi's market share will be slightly above the 7.2% it registered in the first half of 2007.

J.P. Morgan is healthier than Citi these days by most accounts, with just $5.7 billion of credit-crisis writedowns. Still, the institution has laid off numerous staffers, both in response to the market downturn and as part of its emergency takeover of Bear Stearns at the end of last month. It trails Citi by just a hair in terms of underwriting volume.

RBS also looks like a lock for a top-five ranking, even though much of the bank's business comes in the form of mortgage-related transactions led by its Greenwich Capital affiliate in the U.S. Meanwhile, Deutsche, Fortis Bank and Bank of America are tightly bunched around fourth, fifth and sixth places.

That represents a jump from 10th place a year ago for BofA, as the bank was able to preserve more business than many of its peers. Fortis, which ranked 23rd at the midpoint of 2007, is a contender for a different reason: The bank owes its standing largely to a $23.5 billion securitization it completed this week, and presumably sold to a central bank in Europe. Former also-ran Lloyds TSB appears poised to nab a top-10 spot as well, thanks to a similar $22.4 billion arrangement The cusp of the top 10 is occupied by Lehman Brothers, UBS and BNP Paribas, even though structured-finance-related troubles at Lehman and UBS might indicate that those banks would be comfortable with lower rankings.

At the same time, Barclays, Credit Suisse, Merrill and Morgan Stanley appear to have lost the top-10 rankings they held a year ago, as each responds to the debt market's implosion. They're now in the 15th-25th place span, as are Goldman and Wachovia - which were in 12th and 13th a year ago.

The decline in Goldman's activity stands out as an example of how some banks have become more selective about which deals they handle, as opposed to being forced out of the business. Indeed, Goldman has been weathering the credit crisis better than most of its peers, which would seem to position it to seize more underwriting business.

Overall, issuers around the world sold about $470 billion of new asset- and mortgage-backed bonds during the first six months of 2008, a decrease of nearly 70% from $1.49 trillion on June 30, 2007. Asset-Backed Alert will publish its final midyear underwriter rankings on July 4. v



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