Saudi Aramco set to pay up to $450 million in fees to IPO advisers

Investment bankers from around the world have been pitching for years to win a coveted role on Aramco’s IPO

Advisers working on Saudi Aramco’s mammoth share sale may split a fee pool of as much as $450 million, according to people with knowledge of the matter, making it one of the biggest IPO pay outs globally.

The oil giant is set to pay between $350 million and $450 million to a group of more than 20 banks working on its initial public offering, the people said, asking not to be identified because the information is private. The payment would represent a fee of about 1 per cent on the $40 billion Aramco is seeking to raise — relatively low compared to other markets. J PMorgan Chase & Co. and Morgan Stanley are expected to be paid the most, the people said. The final amount paid to banks will depend on how much Aramco raises, they said. A representative for Aramco declined to comment….

Falling Short

Even though Saudi Aramco’s would be one of the biggest fee pools for investment banks, it would still fall short of the $535 million Softbank Group Corp. paid when it raised $21 billion by selling shares in its Japanese telecommunications business last year.

Still, perhaps bankers shouldn’t complain too much. When Saudi Arabia’s National Commercial Bank raised $6 billion in its 2014 IPO, advisers including HSBC and Gulf International Bank were paid just 0.1 per cent of the offering value.,,,

A Rs 1.45 trillion tax cut may undermine rate reductions in India

While the central bank has cut rates four times this year, banks have been reluctant to fully pass on Asia’s most aggressive easing amid a surge in bad loans

India’s $20 billion tax-cut boost may have an unintended effect of keeping borrowing costs high. The premium of 10-year yields over the central bank’s policy rate widened to the most since April after the surprise stimulus announced Friday raised fears the government will miss its budget deficit targets. Traders say the spread offers lenders little incentive to pass on past interest rate cuts to customers.

“Why would a bank take credit risk when they can simply borrow from the Reserve Bank of India and invest in a government bond and just sit on it,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts Ltd. in New Delhi.

While the central bank has cut rates four times this year, banks have been reluctant to fully pass on Asia’s most aggressive easing amid a surge in bad loans. The widening spread reflects worries about the government adding to its record borrowing after the major booster.

“A high term premia, together with wider credit spreads, would mean that interest rates for end-borrowers will remain high despite steep rate cuts of 110 basis points announced this year,” Neelkanth Mishra, India strategist at Credit Suisse Group AG, told BloombergQuint….