Investment banking: Ambitious locals up the ante in Asia

By:
Rob Hartley
Published on:

The traditional players continued to fight it out for investment banking spoils in the Asia-Pacific region in 2014, but Chinese banks are on the rise and regionals are pushing for a bigger share of the pie.

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The current trend in banking to understand your strengths and focus strategy on those areas seems highly suited to the Asia-Pacific region. The heavily-localized markets and strong levels of competition can prove a tough environment for those without a strong conviction in their expertise and good knowledge of a target country.

The days of simply piling into every business area and geography on a relentless quest for expansion are disappearing. Streamlining your investment banking business and pointing it in the direction of opportunities with a laser-like precision is the order of the day.

For some banks, this means pulling out of unprofitable areas, while for others it means a drop-off in competition and a clearer playing field. Then there are those that still see value in competing for every trophy. And with all of these strategies in force, the competitive landscape in the Asia-Pacific region for 2014 always promised to throw up some surprises.

Bankers rarely praise the opposition in public, but privately they acknowledge the impressive year that Goldman Sachs has had in 2014. 

According to Dealogic, the US investment bank finished top of the Asia-Pacific ex-Japan IB revenue rankings table for 2014 (all figures in this article valid up to December 8) with net revenue of $541 million. Goldman moved up from a fourth place ranking in 2013.

"Asia-Pacific is an extremely competitive market where we always face off against a range of very diverse contenders," says Matthew Westerman, head of investment banking for Asia-Pacific ex-Japan at Goldman Sachs.  

"This year we have done a good job of identifying themes that are important for our clients and then creating and executing innovative ideas to capture the opportunities they present. We feel the franchise is in a strong position going into 2015."

Competition

UBS took second spot in the Asia-Pacific ex-Japan IB revenue rankings table for 2014, down from the top spot last year. Deutsche Bank came third, with Morgan Stanley fourth and Credit Suisse fifth. Citi jumped up to sixth with $391 million in net revenue, from eighth the previous year.

"Competition is always there and it’s been another competitive year – from a combination of local banks and international banks, and the Europeans are starting to re-engage with Asia," says Stephen Bird, chief executive, Citi, Asia-Pacific. "The large domestic banks are increasingly competitive and increasingly able within one market to compete very effectively."

Bird was pleased with his bank’s performance in Asia in 2014 and is optimistic for further growth in 2015 in several key business areas.

"All the elements of the Citi model in Asia clicked in 2014," he says. "On the banking side it was a very strong year that’s reflected in the league tables but more importantly we increased wallet share with key clients across areas such as M&A and capital markets."

Bird adds: "When I look across our core institutional platform, Citi’s global banking capability is increasingly helping us to differentiate versus our peers. We are winning market share. Despite slowing global growth Asia’s corporate champions have continued to perform strongly and are using our network across Asia and the world in areas such as cash management and trade finance to capital raising and strategic advisory work."

Matthew Westerman-large
 Asia-Pacific is an extremely competitive market where we always face off against a range of very diverse contenders

Matthew Westerman

There was much chopping and changing in the M&A revenue rankings in 2014 for Asia-Pacific ex-Japan. Goldman ran away with the top spot, clocking up net revenue of $173 million. UBS grabbed second place with $116 million and Credit Suisse came third with $107 million.

"With the bulge brackets in 2014, the spread of performance in the tables is huge, and much bigger than it normally is," says one senior M&A banker in Asia-Pacific. "At the bottom end of the table, there are people down there that have virtually done no deals. Some big names are down there having done virtually nothing. On the north of $2 billion deals, it's the big guys that are doing them."

Goldman also topped the ECM revenue rankings for Asia-Pacific ex Japan for 2014, notching up $281 million in net revenue, climbing to first place after finishing second in 2013. UBS, which topped the table last year, was pushed into second position in 2014 with $243 million in net revenue.

HSBC has also been aiming to boost its ECM business in the Asia-Pacific region and has made some key hires with this purpose.

"The past year has been strong for us," says Alexis Adamczyk, co-head of ECM, Asia-Pacific at HSBC. "We continued to build our stronghold in Hong Kong and China. What we would like to achieve is to extend that franchise to other geographies in the region. We have hired a few key people and are already starting to see a stronger pipeline.