Good times are likely ahead for JPMorgan Chase & Co. JPM. The Wall Street giant is estimated to have recorded over $6 billion in investment banking revenues for 2015 (per data released by Dealogic last week), thereby maintaining its #1 Rank in Global Investment Banking fees. Moreover, it is heading toward a strong start in 2016 as well.
The New York-based bank is likely to play a pivotal role in a potential initial public offering of Saudi Arabian Oil Company, the largest state-owned oil firm, popularly known as “Aramco”.
With an estimated value of $1−$10 trillion, Aramco has the potential to become the world’s most valuable company, surpassing Apple Inc. AAPL which currently boasts a market capitalization of approximately $538 billion. Such valuation makes Aramco’s IPO a dream for every investment bank on the Wall Street.
According to Bloomberg, for the IPO, Aramco will likely choose from banks with which it has conducted business in the past. This makes JPMorgan, which currently ranks #4 among the top 10 IPO advisors to have served the kingdom over the past decade, a strong contender for the upcoming listing.
However, JPMorgan faces tough competition from HSBC Holdings plc HSBC, which holds the #2 position in the above-mentioned advisors’ list. Notably, the U.K.-based bank served as the sole foreign advisor for the $6-billion IPO of the National Commercial Bank, (the nation’s largest public listing till date). Moreover, it had advised Aramco on the floatation of its Rabigh Refining & Petrochemical Company subsidiary, back in 2008.
On the other hand, JPMorgan has previously served as an advisor to the $2.5-billion IPO of Saudi Arabian Mining Company in 2008. In 2015, JPMorgan and HSBC jointly facilitated a $10-billion loan for Aramco.
Frankfurt-based Deutsche Bank AG DB is also a potential contender. However, The Goldman Sachs Group, Inc. and Morgan Stanley are most likely to be overlooked, given their relatively low business experience in Saudi Arabia.
Reportedly, till date, Aramco has neither awarded mandates nor sent out requests seeking advisory roles. However, Mohammed bin Salman, the deputy crown prince of Saudi Arabia, stated that a decision over the IPO will likely be made “over the next few months”.
If chosen, the deal will significantly contribute to JPMorgan’s Corporate & Investment Bank segment revenues that comprised 35% of the company’s net revenue for third quarter 2015.
Currently, JPMorgan carries a Zacks Rank #3 (Hold).
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