Best emerging markets equity house:
Credit Suisse
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Also shortlisted: Citi Goldman Sachs |
| View more 2014 awards |
For all the bearish sentiment towards Credit Suisse’s investment banking operations, amid the revenue challenges facing its FICC platform, it’s high time to bestow credit on the firm’s highly impressive and under-appreciated strengths in emerging market equities. In recent years, Credit Suisse at a group level has made a concerted effort to diversify its revenues away from an over-reliance on fixed income, bolstered by a strong issuance and advisory franchise globally.
However, Credit Suisse has, for years, been endowed with a strong emerging-market equity capital markets franchise, largely prioritizing this business even as it downsized operations elsewhere, and amid stubbornly strong competition in key markets in Latin America and Asia, where Goldman Sachs, JPMorgan, UBS, Morgan Stanley and Citi also jockey for position.
What’s more, Credit Suisse has never been over-reliant on Middle Eastern equity income, a strength considering that, over the review period, there were few IPOs in the region.
The firm has demonstrated creativity, bespoke solutions, repeat business and long-term relationships in its equity offering, from IPOs, follow-ons, rights issues, block trades to convertibles, in a challenging year for deal flow amid risk aversion and EM equity market volatility.
| We have captured intra-regional and inter-regional flows thanks to our strong local and international distribution capacity. What sets us apart is that we have been working for truly entrepreneurial companies, rather than focusing on low-margin sovereign business Joe Reece |
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While firms with stronger corporate banking franchises – including transaction services, or large scale sales and trading operations – argue their business models boost their competitive position in the equity business, Credit Suisse deserves credit for its market-leading position, punching above its weight in deal volume terms. In a year of fee deflation for bookrunners, particularly in Asia, the achievement is all the more impressive.
Credit Suisse is second in dollar volume for IPOs and follow-ons, excluding Chinese A shares, and number one for number of deals, with over 10% more than JPMorgan at number two. Credit Suisse has broad-based underwriting capacity, boasting second place in Latin America in dollar volume and top spot in numbers of deals. In the all-important US listed market, it has the largest market share, having executed 35 emerging market deals. It also posted first and second position by number of deals in Asia Pacific and EMEA, respectively, over the awards period.
In convertibles Credit Suisse was involved in $11.4 billion of equity deals, with a 5.16% market share.
Joe Reece, global head of ECM, says: “From Russia to Latin America, the breadth of our geographical footprint is unique, as is the sheer number of deals over the awards period at 102, many of which have opened up local capital markets.”
He adds: “We have captured intra-regional and inter-regional flows thanks to our strong local and international distribution capacity. What sets us apart is that we have been working for truly entrepreneurial companies, rather than focusing on low-margin sovereign business. We might not have the largest equity team compared with our competitors but, as recent years have demonstrated, we are in emerging markets long term and we will stay the course.”
Diverse industries
Standout deals included acting as sole global coordinator for the $1.2 billion IPO of True, Thailand’s second-largest, and the country’s first and only telecom infrastructure fund, amid the political noise in December 2013, and an increased follow-on offering for Graña y Montero, the largest engineering and construction company in Peru, in July 2013 amid the summer volatility. Credit Suisse also acted as joint bookrunner for the largest Malaysian IPO in 2013, with a $860 million deal for UMW Global, the second-largest Asian oil & gas services IPO, with books multiple-times covered on one day of bookbuilding.
In Latin America, the Swiss firm boasted a second place share of wallet in the region and a 9.2% share of ECM volume, pricing 18 transactions.
Boosted by the strength of its equity trading platform in Brazil and Mexico, Latin America’s two largest markets, the bank executed transactions in diverse industries, from education, real estate to transportation, such as the IPO for Brazilian air carrier Smiles for $560 million last April.
In Latin America especially, it was the year of the follow-on offering, representing three-quarters of all deals and 58% of total equity volume. Credit Suisse duly arranged 15 transactions in the region, representing top share of wallet. Follow-on deals include Colombian cement producer Cementos Argos’s $879 million offering last June and a $940 million sale for Mexican lender Grupo Financiero Inbursa.
Credit Suisse’s equity franchise is bolstered by a 750-strong cash sales and trading team, a decent local presence for prime services and research coverage of around 1,000 EM corporates. The key challenge will be how the firm grapples with strong competition in the ever-important China ECM business in the years ahead, given the sizeable market-share taken by UBS and Goldman Sachs.
