What fees? When bankers pay to do deals
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What fees? When bankers pay to do deals

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As an ex-banker, I am used to hearing rants about the miserable fees paid by Asia’s state-owned issuers, but even I struggle to comprehend the lengths dealers must now go to if they want to win a deal.

I caught up with one head of DCM from India this week — he had brought some of his key clients to meet investors in Hong Kong — and he was very clear about why his group did not include a single representative from a state-owned firm.

After years of dealing with SOEs, his firm made a New Year’s resolution to stop working with them. The reason was, of course, fees. Or should I say the lack thereof.

It is no secret that India’s SOEs usually pay a very “nominal” fee to banks for their services. Talk of the token one rupee fee has done the rounds for years. But one of my friend's clients went a step too far on a bond deal when the treasury slapped his legal and accounting expenses on the banks running the deal.

According to the client, the banks should have been happy for the business as the deal would help them climb a couple of notches on the league table.

But from that moment on, my friend and his firm decided to leave state-owned mandates well alone.  

A sensible approach for sure. But I couldn’t help but admire the issuer for having made its banks shell out money for providing it a service. Now that is an impressive negotiation skill. Bankers – watch and learn.