(MENAFN- Gulf Times) Financial firms raised the most money this year in US initial public offerings since 2008, as investors shook off doubts from the credit crisis and bet that a new breed of lenders is poised to wrest business from big banks.
Citizens Financial Group and LendingClub Corp are among banks and consumer-finance companies that have raised a combined $16.8bn, fueling the best year for all IPOs since 2000. Four of the five largest US debuts involved financial- services firms, with the industry accounting for about 19% of capital amassed in all sales.
Financial IPOs are making a comeback as a strengthening US economy has boosted equity markets and prospects for consumer lending. While deals involving large banks are slowing, smaller firms that use technology to make borrowing cheaper and easier are poised to stoke a new round of offerings next year, according to bankers, investors and analysts.
"For some of the biggest deals, the IPO was about putting the financial crisis in the rearview mirror," said Jeff Davis, managing director for the financial-institutions group at Mercer Capital in Nashville, Tennessee. "If the stock market stays robust and consumer credit remains in good shape, next year will be another great year for financial-service IPOs."
Forty-two financial firms, including banks, asset managers and specialty consumer-insurance companies, had initial offerings through December 19, the most since 2005, according to data compiled by Bloomberg.
While 2014's biggest IPO was Chinese e-commerce giant Alibaba Group Holding's record $25bn sale, rounding out the top five were Citizens Financial, Synchrony Financial, Ally Financial and Santander Consumer USA Holdings.
Even as banks helped drive a record year for initial offerings, they've underperformed all IPOs. Financial-services firms that went public this year gained 8.4% on average through December 19, compared with a 16% increase for all US debuts, according to data compiled by Bloomberg.
Among the worst performers is Santander Consumer, the US auto-lending unit of Banco Santander, Spain's largest bank. The shares have declined 17% since its January IPO as regulators increase scrutiny of subprime car loans. Investment bank Moelis & Co has turned in one of the best performances, gaining 37% since its April debut amid a surge in US mergers and acquisitions.
Some of the biggest initial offerings were fuelled by larger banks looking to divest businesses and meet regulatory demands. Royal Bank of Scotland Group spun off Citizens, its US subsidiary, amid pressure from the British government to boost profitability and return some of the £45.5bn ($71bn) it received in a bailout five years ago. RBS raised $3.46bn, including an overallotment, in the biggest bank IPO since Goldman Sachs Group in 1999. Providence, Rhode Island-based Citizens has gained 16% since its September debut.
Ally Financial, the bank bailed out by taxpayers in 2008, raised $2.56bn for the US Treasury in an IPO that was more than three years in the making. The Detroit-based auto lender, which has declined 10% since its April offering, had put plans to go public on hold as it worked to clean up its mortgage unit.
Many banks "had been looking to do something for a long time, and more happened to come together in the same year," said Andy Sanford, head of equity capital markets for Wells Fargo & Co.
Companies looking to go public took advantage of surging US equity markets and signs the country's economic recovery is gaining steam.
The Standard & Poor's 500 Index and Dow Jones Industrial Average both climbed to record levels this month.
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