Wall Street banks including Citigroup, JPMorgan and Morgan Stanley are poised to share at least $300m in fees from the blockbuster dual listing of Chinese payments company Ant Group, in what is likely to be the biggest windfall in a decade for bankers in Asia’s top financial hub.

Ant is expected to offer up to 15 per cent of its shares in a dual offering in Hong Kong and Shanghai at a valuation of between $200bn and $300bn, according to people familiar with its plans. At the top end of the range, the listing could even net up to $450m in Hong Kong — a record for Asian deals outside Japan.

The fees from the Ant Group initial public offering will be “humongous” said John Mullally, a Hong Kong-based director for financial recruitment group Robert Walters. “People who run banks in Hong Kong are hoping it is a harbinger of how the city will streak ahead, especially with more Chinese companies choosing it over the US,” Mr Mullally added.

Fees are likely to represent 1.5 per cent of the IPO’s size — the midpoint of the typical range in Hong Kong according to bankers and lawyers. How they are distributed will depend on the way the offering is divided between Hong Kong and Shanghai and on the final size of the deal.

The Ant flotation is poised to provide the biggest fee pool for an Asian deal outside Japan since the $408m earned in AIA Group’s $20.5bn Hong Kong listing in 2010, according to data from Dealogic.

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Bar chart of Fees on primary listings ($m) showing Ant Group IPO fees could break Asia ex-Japan record

Citi, JPMorgan and Morgan Stanley declined to comment on expected fee revenues from the IPO. China International Capital Corporation — also a sponsor on the deal — did not respond to a request for comment. 

Ant’s market debut is expected as early as October, according to people familiar with the payments group’s plans. A fundraising of $20bn would roughly triple the exchange’s total from $9.5bn for the year so far, and take the total $4bn beyond the tally for 2019.

The expected windfall for the top investment banks on the Ant Group listing follows a fall in deal volumes and fees in 2019. In response to that downturn, Morgan Stanley cut its 2019 investment banking bonus pool by about 9 per cent in Asia, while Citi’s regional business trimmed its pool by about 6 per cent.

Still, despite simmering hostility between Washington and Beijing this year, Wall Street banks have earned more than $410m in fees from Chinese listings in New York and Hong Kong in 2020, up almost a quarter from a year ago.

“There’s going to be a lot of deals [this year] with everyone sitting on a big pipeline,” said Philippe Espinasse, a consultant and former head of equity capital markets at Nomura.

Mr Espinasse added that Hong Kong share offerings were “increasingly seeing Chinese banks in top positions”, nudging out international peers as mainland financial groups expanded their presence in the city. This month a Financial Times analysis found that mainland investment bankers would soon outnumber their global rivals in Hong Kong.

Mr Mullally warned that Ant’s IPO was more of a “welcome blip” for the city’s bankers, who still face pressure to minimise costs from Chinese corporate clients.

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“The tendency in China amongst Chinese corporates is to squeeze bankers on fees,” he said. “Ant’s size mitigates that but it is not going to be a game-changer for bonuses and fees in general.”

Via Financial Times