Bank of America Merrill Lynch stayed ahead in the ranking of municipal bond underwriters for 2017, even as the par value of deals fell for BAML and for nine of the top 12 firms.

Public Financial Management Inc. retained its spot atop the financial advisor league table for 2017, a year that fell short of 2016's record for volume, even after the biggest-ever single month of issuance in December. The state of California was the largest municipal issuer, according to Thomson Reuters data.

As opportunities for issuers to save money by refinancing dried up from 2016, volume for the top 12 underwriters dropped to $409.93 billion in 10,590 transactions for the year, from the $423.60 billion in 12,266 deals in 2016. RBC Capital Markets, Goldman Sachs and Jefferies were the only firms credited with a higher par amount in 2017 than in 2016. In the fourth quarter alone, the top 12 firms accounted for $137.92 billion in 3,009 deals.

Kym Arnone Headshot
Kym Arnone

“We are pleased with our continued momentum. 2017 was a strong year for us across the board, with increased market share in senior managed negotiated and competitive business,” said Kym Arnone managing director and joint-head of municipal investment banking at Jefferies. The firm handled $10.18 billion in par to climbed to 12th from 14th in the rankings.

“We have made a number of strategic hires in banking, sales and trading that rounded out our talented team and has contributed to our growth," Arnone said. "We are grateful for the support of our clients and look ahead to continued success in 2018 and beyond.”

BAML underwrote $63.17 billion in 547 issues for the year and $19.88 billion in 157 transactions for the fourth quarter – good for first place for both. The largest deals it ran the books on in the fourth quarter included: the North Texas Tollway Authority’s $2.51 billion, New York MTA’s $2.02 billion and Michigan Finance Authority’s $837 million. In total, the firm was lead manager on 48 deals with a par amount of $100 million or larger.

Citi underwrote $11.74 billion in the fourth quarter of the year and a total of $46.67 billion for the year, good for third and second place respectively. Citi was lead-manager on Berks County Industrial Development Authority’s $590.5 million, Virginia College Building Authority’s $560.55 million and Metropolitan Transportation Authority’s $500 million. For the entire quarter, Citi ran the books on 39 deals $100 million or larger in par amount.

JPMorgan came in second place for the quarter with $15.84 billion and third for the year with $40.07 billion, or 9.8% market share. Some of JPM’s biggest deals of the quarter were the Chicago Board of Education’s $1.02 billion, Massachusetts Development Finance Agency’s $696.82 million and Illinois Finance Authority’s $544.52 million.

“The market handled the December wave of supply surprisingly well. Despite periods of increased market volatility from one day to the next, all in all, deals were executed very well,” said Jamison Feheley, head of public finance banking at JPMorgan. “Issuers did an excellent job communicating effectively to the market and maintaining as much flexibility as possible. It was a very strong quarter for J.P. Morgan and we are very appreciative of the large number of issuers that put their confidence in us to move quickly and successfully navigate the challenging year-end market conditions.”

Jamison Feheley, JPM's head of public finance banking.
Jamison Feheley

Feheley added JPM is hoping for a comprehensive infrastructure plan from Washington that will meaningfully address the country’s critical infrastructure needs.

“While tax reform has certainly impacted the municipal market, and the loss of advance refundings will decrease overall issuance volume, the market remains strong and we see significant opportunities ahead,” he said.

Morgan Stanley underwrote a par amount of $11.63 billion in the quarter, finishing the year with $32.39 billion in 365 transactions.

Chris Hamel
Chris Hamel

RBC was sixth for the quarter with $8.69 billion, but finished 2017 with $26.16 billion, up from $23.61 billion. The firm moved up a notch into the top five as its market share increased to 6.4% from 5.6%.

“RBC is appreciative to its many clients for enabling an increase in 2017 market activity," said Chris Hamel, managing director and head of the municipal finance group at RBC Capital Markets. "We look forward to continued success in 2018 and are gearing up for whatever the year may bring.”

Goldman saw the biggest leap again, rising to sixth place for the year with $25.90 billion from 11th place with $15.78 billion in the previous year. The firm’s market share rose to 6.3% from 3.7% during the same period of time.

“We had a great year in 2017 in terms of market share and par amount underwritten. Our plan is to try and build on that momentum and continue to grow our presence,” said Kevin Willlens, co-head of the public sector and infrastructure financing group at Goldman. “We do not want to be deterred by the volatility in issuance volume in 2018. We have a diverse platform and plan to also continue to execute taxable transactions and provide clients other creative financing solutions. We are bullish on the business.”

Willens added that Goldman plans to put more focus on the competitive bid market, but that the biggest challenge going forward, with advance refundings gone, is what alternatives issuers will turn to. The path of interest rates will “determine what issuers do,” he said. “It will be interesting to see how the new tax rates shifts the mix of investor demand for munis.”

Wells Fargo finished seventh for both the quarter and year, dropping two spots from where it finished a year ago, as the firm continued to suffer from the fake account scandal that prompted some issuers to suspend doing negotiated deals with the bank. Wells underwrote $23.04 billion for the year, compared with $26.11 billion in 2016.

Stifel ranked eighth with $18.55 billion for the year, and was responsible for the most transactions with 854. Raymond James is next with $14.44, followed by Piper Jaffray with $14.22 billion, Barclays with $13.46 billion, and Jefferies with $10.18 billion.

Financial Advisors
Public Financial Management finished the year with a par amount of $63.47 billion in 996 deals, good for an 18.4% market share. That compares with $74.70 billion in 1,199 deals or 21.2% market share in 2016.

“2017 was a tumultuous year in the municipal market capped by a frenetic issuance atmosphere in the final two months of the year,” said John Bonow, chief executive officer and managing director for the PFM Group. “As a steadfast, independent advisor to its clients, PFM’s ability to help municipal and non-profit institutions consider financing options and make good decisions throughout the year has rarely been more professionally gratifying. The trust placed in PFM by clients in our partnership with them is based on our principled approach to providing advice with ingenuity, sustainability and resourcefulness.”

He said PFM will to help clients navigate the capital markets that may be more challenging in 2018, as the new tax law removes an important interest cost management tool in advance refunding, threatens key aspects of municipal and non-profit credit, and alters the way many traditional investors evaluate a fair rate of return.

“We are also hopeful that a meaningful infrastructure plan with be available in 2018, so our clients, who are responsible for much of the nation’s infrastructure at the state and local level, will have some clarity about funding options and the best way to responsibly serve the public in ways that help fuel the U.S. economy,” Bonow said.

Public Resources Advisory Group ranked second with $52.38 billion, a 15.2% market share. Hilltop Securities is third with $35.82 billion or 10.4% market share. Acacia Financial Group held its spot in fourth, as its par amount increased to $15 billion from $13.83 billion. And KNN Public Finance was fifth with $10.62 billion, up from $8.11 billion the year before.

Municipal Issuers
California remains the top municipal issuer. The Golden State leads the ranking with a par amount of $8.87 billion in eight deals. Dormitory Authority of the State of New York is second with $7.43 billion, followed by the New York City Transitional Finance Authority with $6.50 billion. The state of Illinois is fourth with $6.25 billion and the New York MTA is fifth with 5.64 billion.

Rounding out the top 10 were: California Health Facilities Finance Authority with $3.78 billion; New York City with $3.74 billion; Empire State Development Corp. with $3.59 billion; State of Wisconsin with $3.49; and the Commonwealth of Massachusetts with $3.10 billion.

Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.