Best bank:
HSBC
Best equity house:
Merrill Lynch
Best debt house:
HSBC
Best M&A house:
Goldman Sachs
One of the broad trends in local banking in Hong Kong in the past year was the soft, sluggish loan market. Although most banks are able and willing to lend, since cleaning up their balance sheets, demand has remained weak. Pricing and spreads have also suffered. Banks are only able to get 60 basis points instead of the 200bp common in 2000. Mortgage lending is at the lowest for a generation. And it’s the same in the wholesale market. Spreads are hardly profitable and unless this improves, the banks that traditionally rely on lending will have to start diversifying their income bases.
The weak market conditions hardly affected HSBC. It is, without question, the most impressive bank in Hong Kong. But in its home market so it should be. In terms of management calibre, franchise, ability to structure its business and the returns it gives to shareholders, it is head and shoulders above the rest. In markets that others found challenging its profits rose an impressive 45%.
It’s going to take some effort to knock HSBC from its throne of best bank in Hong Kong. It has depth and strength across the board, from its retail business, through its treasury and to its debt capabilities. One statistic often bandied about, although not new, is still impressive: three in four adults in Hong Kong hold some sort of HSBC account. Its branch network is far and away the broadest with 200 offices. It also controls 50% of the online banking market and is the largest telephone bank in the territory.
On the debt side, HSBC is again impressive. For the past eight years it has been the lead book runner of Hong Kong dollar issues. In the last year it was unsurprisingly joint lead-manager for some of the most important deals out of Hong Kong. These include Hong Kong Land’s $600 million global bond issue, and MTRC’s $600 million global notes issue in November 2000. Then there’s the small point of its having a 50% market share in syndicated loans.
One deal of note, because of its size, was the $12 billion acquisition finance facility for Doncaster Group Limited in its takeover bid for Cable&Wireless HKT. It was the largest syndicated loan raised in Asia to date.
Best M&A house goes to Goldman Sachs to add to its regional award. M&A transactions were down but Goldman was still able to pull in its share of the few that came to market. And, as is so often the case, it can count on repeat business, mainly from Hutchison Whampoa. It was also adviser to China’s largest wireless operator, China Mobile (Hong Kong) Ltd, on its acquisition from its parent company, China Mobile Communications Corp, of seven mobile phone networks.
Merrill Lynch remains a powerful equity house. It claims a 10% market share in secondary trading alongside its highly regarded research. It was also responsible for some impressive deals, such as Hutchison Whampoa’s $3 billion exchangeable into Vodafone in September 2000, the largest ever Asian convertible bond. This was followed up with a second one in January for $2.5 billion. As well as the large elephant transactions Merrill also dipped its toe into arranging flotations on Hong Kong’s Growth Enterprise Market (GEM). Phoenix Television’s $112 million offer was the first Hong Kong GEM offering by a US bulge-bracket house. It can also lay claim to being the largest GEM offering since the tech meltdown in March 2000.
