HONG KONG (Reuters) -Investment banks handling the world's largest listing so far this year are set to earn underwriting fees well below the industry norm, with advisers willing to endure skinny margins to win business following a prolonged slump in listings.

Nine underwriters of Shenzhen-listed battery giant CATL are slated to receive a maximum of HK$238.7 million, the Chinese company said in a securities filing on Monday, with much of that discretionary, based on the success of the deal.

The fixed commission on what is Hong Kong's biggest listing so far this year is just 0.2% of the proceeds raised, well below the industry average.

It's only a third of what home appliance manufacturer Midea paid banks last year for its near $4.6 billion listing in Hong Kong, and one-fourth of the 0.8% underwriting fee awarded by China's largest express delivery company S.F. Holding in its $792 million Hong Kong second listing last November.

CATL said in the filing it may grant a 0.6% discretionary fee as an incentive.

The razor-thin fees underscore challenging conditions for banks in Asia's financial hub, even as a recent surge in trading volumes and new listings has ignited hopes for a revival in large Chinese issuances.

"The fee income barely covers the cost, but banks are eyeing the discretionary fees and hope securing a role will help them stay on future deals," said one source familiar with the pitching process.

Banks typically get paid 2% to 2.5% of the total proceeds raised from a Hong Kong initial public offering, bankers say, however deals bigger than $500 million could compress the fee to 1%. The commission paid to CATL's underwriters would be 0.76% at its maximum.

Dealogic ranks Hong Kong as one of the lowest fee-paying financial centres in the world.

JPMorgan ( JPM ), Bank of America, China International Capital Corporation ( CNICF ) and China Securities International are the sponsors of the CATL deal.

Each of the sponsors will earn $300,000 for the role, which is around half the market average for the last five years, according to Dealogic data.

CATL did not immediately respond to a request for comment.

FEE SQUEEZE

International and Chinese banks have suffered a multi-year long deal slump in Hong Kong, but a recent revival in transactions has fuelled hope of a comeback for large issuances.

CATL's books have been multiple times oversubscribed with strong demand from sovereign wealth and global long-only investors since its launch on Monday, according to a book message sent to investors on Tuesday and reviewed by Reuters.

Some underwriters jostled to win a role in the deal, willing to accept much slimmer fees than normal thus sacrificing margins, three sources with knowledge of the pitching process told Reuters.

Goldman Sachs ( GS ), Morgan Stanley ( MS ) and UBS are joint global coordinators on the CATL Hong Kong listing, with BNP Paribas and Guotai Junan in junior roles.

However Goldman Sachs ( GS ) and UBS, both of which have worked on some of CATL's previous equity deals, decided not to pursue more senior roles on the new listing partly due to the low fees, said two sources familiar with the matter.

Goldman Sachs ( GS ) and UBS declined to comment.

Both banks worked on CATL's 45 billion yuan share placement in 2022 and advised the company in an attempt to raise over $5 billion in Swiss global depository receipts offering in 2023.

($1 = 7.7932 Hong Kong dollars)

($1 = $1.0000)

($1 = 7.2011 Chinese yuan)