JPMorgan took first place among underwriters of municipal bonds in 2011, a year that saw dealers fighting over shrunken supply.
Citi was second and Bank of America Merrill Lynch was third, according to Thomson Reuters, which has said it will alter the way it compiles the numbers beginning in 2012 following complaints that underwriters were using various ploys to boost their standings.
In 2011, Public Financial Management Inc. continued as the top financial advisor by volume, advising on $39.6 billion in long-term bonds.
JPMorgan underwrote $39.2 billion of long-term bonds in 2011. This was a decline of 16.2% from 2010, when it underwrote $46.8 billion and placed third. That gave JPMorgan a 13.7% market share as senior underwriter in 2011, up from 10.9% in 2010.
The competition for business took place in a year when there was a 33.3% decline in total long-term municipal bond volume
Citi underwrote $36.6 billion of bonds in 2011 and Bank of America Merrill Lynch did $35.4 billion. Last year they were second and first, respectively.
For negotiated deals, Citi was first, with JPMorgan and Bank of America following at second and third. In competitive deals, Bank of America retained its first place slot, with JPMorgan moving up to second and Citi dropping to third.
As recently as 2007, JPMorgan was the sixth-largest senior underwriter of municipal bonds. In 2008, at the height of the financial crisis, it acquired Bear Stearns.
The firm’s ascent in the rankings “shows the breadth of our franchise,” said Jeff Bosland, head of the public finance group at JPM. “It’s a guide to clients as to the performance of firms overall. But it’s far from the end-all. Our primary concern is to serve the client.”
JPMorgan saw its competitive business expand by 56.9% in 2011 as negotiated underwritings contracted by 30.2% when issuers borrowed less.
This year, issuer clients wanted underwriters to commit their capital in competitive offerings to demonstrate their ability to distribute bonds, according to Bosland.
Thomson Reuters typically revises its figures as new data becomes available, and it plans to soon apply its new criteria, which alters what qualifies as long-term debt. This will shift some issuance currently defined as long term over to the short-term category, and could retroactively change the standings.
JPMorgan’s status as number one may not be affected, but some observers believe that the new criteria could make Bank of America Merrill number two overall, and push Citi to number three.
Some in the industry complained that underwriters have resorted to questionable actions to improve their standings in the long-term issuance rankings (see sidebar).
While the deal pie was considerably smaller in 2011 and some larger firms were forced to show employees the door, smaller firms have been looking to take advantage of the shakeout.
Both Janney Montgomery Scott LLC and Raymond James & Associates Inc. moved up among senior underwriters of long-term bonds. In 2010, Janney was 34th, but in 2011 it was 24th. Similarly, Raymond James was 24th in 2010 but jumped to 15th in 2011.
The progress of Janney is “a testament to the guys on our desk,” said Dale Foard, Janney’s managing director of municipal capital markets.
Raymond James’ advance was due to enhancements on both the competitive and the negotiated sides, said Peter Delahunt, managing director for municipal fixed income.
Raymond James’ hiring of Roberta Breck-Specter in March to lead the competitive side has helped its performance in this area, Delahunt said. On the negotiated side, the firm has hired some key bankers as other firms were contracting, he said.
Raymond James went to ninth from 28th among underwriters of small issues. Its market share went to 2.5% from 1.0%. Thomson Reuters defines small issues as $10 million or less.
Delahunt said Raymond James is bidding competitively for small issues as well as large issues. The firm also does a lot of bank-qualified deals, which are by definition smaller transactions.
Janney went from 22nd place in small-issue underwriting in 2010 to eighth in 2011. Its market share went to 3.0% from 1.4% .
Public Financial Management remained the top FA in 2011. Public Resources Advisory Group and First Southwest stayed second and third, respectively.
“We thank [clients] for their trust and the recognition that experienced, independent advice is even more important today than in years past,” said PFM’s chief executive officer, John Bonow.
Among financial advisors, KNN Public Finance and Robert W Baird & Co. rose in the rankings.
In 2010, KNN was 13th, but in 2011 it moved up to seventh. In a year that saw a 34.9% decline in bonds for firms to work on, KNN increased the amount advised by 20.5%.
“Our winning combination involves experienced advisors providing a very high level of service,” said David Leifer, senior managing director at KNN.
Similarly, in 2010, Baird was the 28th largest advisor, but in 2011, it became the 11th largest advisor. In 2011, Baird’s market share went to 2.0% from 0.6%.
“Baird’s public finance business has made a lot of investments in talent and capabilities on behalf of our clients, and we’re pleased to see that some rankings reflect the positive momentum from those investments,” said Baird’s public finance director, Keith Kolb. “Being a privately held and employee-owned firm continues to be a key strategic advantage for Baird.”