LONDON/NEW YORK - Dealmakers saw business pick up again in the second quarter as they helped companies raise cash in capital markets, but lucrative mergers and acquisitions (M&A) languished.

Worldwide combined capital markets and M&A fees rose for the first time in a year, Thomson Reuters data showed on Friday, up 29 percent from the first quarter, with share sales -- such as rights offerings -- the most buoyant.

There's a shift away from banks being the sole capital source for growth. There are fewer banks in the world and they have less money, David Fass, head of global banking at Deutsche Bank, told Reuters.

Banks are hesitant to lend after the credit crunch depleted their treasure chests, and cash-hungry companies are instead selling bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.

The year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more than $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.

Banks have embarked on massive rights issues to refill their coffers, with HSBC's $19 billion share sale in April topping the table of large deals, the second-largest rights issue of all time, according to the data.

Markets for capital raising have been extremely active, you have seen equity balance sheet repair for the financial sector and increasingly the corporate sector, Enrico Bombieri, head of European investment banking at JP Morgan Chase & Co, said at a media briefing this month.

JP Morgan benefited most from the surge in capital market transactions, topping first-half global league tables in equity capital markets, bonds and syndicated loans.

From underwriting 166 equity issues, the bank earned an estimated $1 billion in fees.

NO MORE LOANS

Global mergers and acquisitions saw the steepest decline since 2001, the data showed, dropping 44.5 percent in the first half of the year from the year-ago period, with companies wary to take on more risk and funding scarce.

Morgan Stanley took the lead in both global and U.S. M&A advisory work, edging aside Goldman Sachs Group Inc in the first half of the year.

Part of the weak deal flow is that banks can no longer support these deals with loans, scared that the recession will cause more bad loans and further toxic assets may come to light, prompting them to reduce their debt levels.

Significantly, syndicated loans -- traditionally the first point of call for acquisition funding in Europe -- all but dried up, hitting their lowest volume in 13 years and dropping 58 percent from the year-ago period.

Europe has traditionally been a bank-financed market ... fundamentally we're seeing a shift away from the loan market to the capital markets, Viswas Raghavan, JP Morgan head of international capital markets, said at the briefing.