JPMorgan takes lion's share of $53 billion in fees

In the fight to survive the global financial meltdown, Hugh “Skip” McGee is beating the odds.

McGee started 2008 as head of investment banking at Lehman Brothers Holdings Inc, a post that by September seemed like the fastest way to a pink slip as Lehman collapsed in the biggest bankruptcy in US history. Now McGee has the same job at Barclays Plc, which bought Lehman’s North American assets.

Barclays’s “Earn Success Everyday” motto streams across the navy blue screen that wraps around the base of the former Lehman headquarters just north of Times Square, where McGee occupies a 27th-floor corner office.

Taking over Lehman helped London-based Barclays’s investment banking unit, Barclays Capital, rise to ninth from eighteenth among the world’s best-paid investment banks in 2008, according to data compiled by Bloomberg. Barclays Capital, when combined with Lehman, took in $1.91 billion in fees from underwriting securities and advising on corporate takeovers.

The number one fee earner in the world was JPMorgan Chase & Co, which also ranked first in the underwriting of stocks and tied with Citigroup Inc for first place in bonds. Citigroup was number two in total fees.

McGee, 49, predicts Barclays Capital will climb a few more rungs as it expands its merger advisory business in Europe and Asia. “We are one of the few places that is going to be investing in the banking business in 2009,” he says.

McGee and his fellow surviving investment bankers inhabit a financial world transformed by crisis.

Investment banks globally have racked up the steepest losses in more than three decades, and the traders who made outsize bets on exotic financial instruments with their firms’ capital are in disgrace.

The leverage they used to magnify earnings, and eventually losses, can no longer be financed. Investment banking has reverted to an earlier incarnation: earning fees from mergers and acquisitions advice and the underwriting of plain-vanilla stocks and bonds.

Fee income is taking a heavy hit along with almost every other source of bank revenue. In 2008, investment banks shared $53 billion in fees, 39 per cent less than the record $87 billion of a year earlier, according to Bloomberg data. The total fell for the first time since 2003 as credit markets seized up, the plunge in stocks zapped demand for initial public offerings and chief executive officers put off deals to hoard cash while economies around the globe sank into recession.