Japan, US banks back atop Asia investment banking

Morgan Stanley sprang back to the top spot in Asian investment banking revenue in the first half of 2024, from fifth a year ago, while Nomura jumped seven places to second, according to data from Dealogic. Five other U.S. and Japanese banks made the top 10.

That marks a turnaround from the same period last year, when Chinese banks held six of the top 10 positions, including the top three, and only four Western and Japanese banks made the list.

Overall, Asia investment banking revenue fell 15% from a year earlier in the first half to US$5.5 billion, according to Dealogic data, owing partly to weakness in China and Southeast Asia. But revenue for Japan climbed 19% from a year earlier, while India’s jumped 58%.

Unlike in the U.S. and Europe where borrowing costs are high, buyout funds remain active in Japan thanks partly to relatively low interest rates, said Akira Kiyota, global head of M&A at Nomura Securities. Big management buyouts are also on the rise in Tokyo, while Japanese companies are increasingly taking strategic actions after the pandemic, aimed at consolidating at home or expanding overseas, he said.

Those forces helped propel Nomura’s investment banking revenue in the January-March quarter to its highest in at least eight years. “The momentum for our business is very strong," Kiyota said. “Interest rates are starting to rise in Japan, but aren’t as high as the U.S. and Europe."

Among the biggest deals in Asia so far this year, Nomura and UBS advised Japanese telecom company KDDI on its plan to take Japanese convenience-store operator Lawson private for about 496.5 billion yen (US$3.14 billion).

For its part, India has hosted several billion-dollar-plus stock offerings on the back of an ascendant equities market and prospects of strong economic growth. Jefferies, Axis Bank and State Bank of India in April helped telecom company Vodafone Idea raise 180 billion rupees (US$2.15 billion) in what was Asia’s biggest equity capital raising in the first half, according to Dealogic data.

Despite the yen’s sharp depreciation, Japanese companies continued to seek growth abroad through acquisitions. Morgan Stanley and Moelis advised Japanese home builder Sekisui House on its US$4.9 billion acquisition of Colorado-based peer M.D.C. Holdings. Deutsche Bank worked with Japanese chip maker Renesas Electronics on its deal to buy Australian design-software company Altium, who was advised by JPMorgan, for 9.1 billion Australian dollars (US$6.15 billion).

One potential risk to merger activities is heightened regulatory scrutiny at a time of U.S.-China industrial competition and the countries’ strained diplomatic relations. Nippon Steel’s plan to acquire U.S. Steel for US$14.1 billion remains bogged down by U.S. regulatory review.

Still, Nomura’s Kiyota said interest in acquisitions of Japanese companies is growing among foreign investors and companies, including those in Asia, due to a weak yen and recent initiatives by the Japanese government and the stock exchange to promote shareholders’ interest.

Recent management buyouts at Benesse Holdings and Taisho Pharmaceutical by prominent Japanese families have also led other family-controlled, listed companies to view management buyouts as a potential strategic option, he said. “This trend is surely continuing this year," he said.

Write to Kosaku Narioka at kosaku.narioka@wsj.com