No big fees seen for banks' advisers

By Daisy Ku

LONDON (Reuters) - The plan to recapitalise three of its largest banks creates winners at the advisory arms of Britain's decimated investment banks, but the deals are not going to win them fat underwriting fees, bankers said.

UBS, Merrill Lynch and Morgan Stanley are winning deals as the government pumps in 37 billion pounds of taxpayers' money to recapitalise three major banks.

But unlike the previous deals this year which earned them 2 to 4 percent fees by underwriting share sales for banks including RBS, HBOS and Barclays, the financial advisers are likely to get around a 1 percent fee from the current round of capital hikes.

"It depends on what percentage of the shares on offer go to the government and what portions of them are being taken by institutional investors," one London-based equity capital markets banker said.

In the case of RBS the fee depends on whether investors are willing to put more cash into the bank after suffering a combined 8.3 billion-pound paper loss since participating in the record 12 billion pound rights issue in June.

With RBS shares closing 8.37 percent lower at 63.85 pence on Monday, below the government underwriting price of 65.5 pence each, a take-up rate of 95 percent is unlikely to be achieved, fund managers said.

"Now the prices have fallen below the government entry levels, you can always buy in the market, or you can wait for more information when they publish the legal-binding prospectus for more information," one fund manager said.

"I won't say nobody is interested, but certainly everybody is cautious," he added.  Continued...