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Wells Fargo |
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Goldman Sachs |
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Goldman Sachs |
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Bank of America Merrill Lynch |
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Citi |
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Citi |
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UBS |
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HSBC |
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TD Bank |
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RBC Capital Markets |
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Best bank in the US
Once again Wells Fargo wins the award for best bank in the US in Euromoney’s awards for excellence thanks to its commitment to and expertise in serving customers, shareholders and employees. It is rare that a bank manages to combine an ability to answer clients’ needs (technology, good service and access to products) while looking at what the larger economy requires (small business loans), with an equal eye on shareholders and profits. Chief executive and chairman John Stumpf has been getting this right for many years. There is no other bank of its scale in the US that meets all the criteria. Wells Fargo is also the biggest bank by market capitalization in the US.
Wells Fargo prides itself on its customer service. It is constantly in touch with what customers are thinking through surveys about their habits or pulse tests on their economic outlook. Knowing your customer beyond just how they want to bank pays off and comes back in the form of deposits. In the first quarter of this year total deposits hit $1.2 trillion – almost 10% more than the first quarter of 2014. In a first-quarter earnings statement Stumpf pointed to this as evidence of the “strengthening of customer relationships,” adding: “Our mortgage business was able to serve more customers by refinancing their mortgage loans with lower rates.”
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John Stumpf leads Wells Fargo’s outstanding commitment to customers, shareholders and employees. |
During the first quarter, residential mortgage originations were $49 billion, up $5 billion from the previous quarter. Loans were up almost $14 billion over the quarter. It’s a gamble depending on how rates move in the short term but long-term investors think it will pay off: investors like Warren Buffett. During the first quarter, Berkshire Hathaway increased its stake in Wells Fargo by about 2% to 470.3 million shares, a total 9.2% stake. The bank is also one of the safest with a double-A rating and record liquidity and capital levels. Its earnings are reflective of its success. In the first quarter, revenues were up year on year, while net income remained steady. Its efficiency ratio remains at around 59%.
Best investment bank in the US and best M&A house in the US
It has been a very positive 12 months for Goldman Sachs, which is has been trying to shed its ‘vampire squid’ label. Twitter, other social media and now iTunes podcasts have been embraced by the firm – chief executive Lloyd Blankfein has been talking about the impact of technology and even sharing his summer reading. Whether or not the PR machine is making Goldman more likeable, the firm’s success at what it does best – deals – cannot be denied. And its earnings reflect that. In the first quarter of 2015 it generated net revenues of $10.02 billion – the highest quarterly result in four years. Investment banking produced net revenues of $1.91 billion – the highest quarterly performance since 2007.
In the US, there is no better investment bank when it comes to large deals being executed. Within equity capital markets the firm succeeded in being selected from three banks as the sole stabilization agent for the $25 billion record-breaking Alibaba IPO. In debt capital markets, acquisition financing has been the feather in the firm’s cap in the US – the bank was lead left global coordinator on Walgreen’s $10.1 billion Boots Alliance acquisition.
It is its expertise in M&A however that earns Goldman Sachs the title of Euromoney’s best investment bank in the US and best M&A house in the US. M&A has been driving the financial markets in the US over the last year and Goldman has been leading the pack. Over the period from the end of March 2014 to April 2015 it advised on 215 deals in North America, according to Dealogic, with a 32% market share. Its nearest competitor was JPMorgan with a market share of 25%.
Michael Carr, who co-heads M&A globally for Goldman Sachs, says the M&A boom has a different tone this time.
“There is a big difference between the peaks in M&A of 2000 and 2006 to the wave that is now occurring,” says Carr. “Rather than being driven by high valuations or large funds raised by sponsors, this wave is about the structural change happening within industries. In healthcare, activity is being driven by the Affordable Healthcare Act. In telecoms, cable companies need to get larger because of where they are in the foodchain now due to digital advancements,” he says.
That requires a different level of understanding and advisory. The firm advised on the most important regional transactions of the year such as Covidien on its $47.9 billion acquisition by Medtronic, and Allergan’s acquisition by Actavis.
Carr points to the latter deal as one of the most challenging of the year. Valeant Pharmaceuticals had been seeking to buy Allergan for months alongside Pershing Square’s William Ackman in an unusual combination of corporate suitor and activist hedge fund. “That was a huge struggle that lasted a year against a determined bidder,” says Carr, and that ultimately resulted in Allergan finding a suitable buyer in Actavis.
“Just by the nature of the fact we work on so many transactions,” Carr says, “we have a lot of experience at solving a variety of client problems. It makes you more valuable and gives clients confidence.”
Carr adds that the bank’s model also provides for greater execution within M&A. M&A specialists are embedded in industry groups, in addition to being a central business line. “It’s a hybrid model of approaching the M&A business that not all banks have,” says Carr.
At the end of the first quarter this year the bank produced $961 million in net revenues in financial advisory. That is more than the revenues in debt and equity underwriting combined – both of which had a good year – and 41% higher than the first quarter last year.
Best debt house in the US
In US debt capital markets, it is Bank of America Merrill Lynch that has made the biggest impression over the last 12 months. It wins the award of best debt house in the US.
No other bank can match the firm when it comes to investment-grade bonds and loans, some of which have been driven from the M&A boom.
“There has been a proliferation of large scale M&A and then big M&A financings outside of the window – like AT&T, Apple and Oracle,” says Andrew Karp, co-head of Americas investment-grade capital markets at Bank of America Merrill Lynch. Indeed BAML is the first port of call for US corporates when it comes to funding in euros or in dollars. In February BAML led Coca-Cola’s €8.5 billion five-tranche offering, the largest euro offering ever by a US company and the largest euro offering in the past six years. The deal kicked off a stampede of US companies going to the euro market in the first quarter because of low coupons and tremendous investor demand.
It’s not just plain vanilla jumbos that the bank excels at. It is an innovator in the emerging green bond market. In the awards period, the bank launched a US real estate investment trust green bond, a high-yield green bond and a US dollar benchmark green bond by Indian issuer, Exim Bank.
In private placements, BAML has the largest market share by volume and number of deals.
“We have helped many clients access the private placement market as there are arbitrage opportunities there,” says Karp. The bank prides itself on being product agnostic and creative. For healthcare firm Medtronic the bank was lead left on the $3.5 billion revolver, $3 billion term loan and $17 billion bond offering across seven tranches, along with being the hedge coordinator. It also offered a $16.3 billion financing commitment, serving as the sole lead arranger, sole bookrunner and sole underwriter on the bridge. It was the largest 144a bond offering and was the largest healthcare transaction ever as the financing need grew from $3 billion to $17 billion when the Department of the Treasury revamped rules related to inversion transactions.
Best equity house in the US
Citi too has made strides this year in its debt capital markets business. It was lead left on Microsoft’s $10.75 billion deal, for example, but it is in equity capital markets that the bank receives an accolade this year, winning best equity house in the US. It ranks first in IPOs and second in all equity transactions so far this year. It has been a much quieter 12 months than expected, but there have still been some extraordinary deals. The $25 billion US IPO of Alibaba in September 2014 was the largest IPO in capital market history. Citi was a lead on the deal – Alibaba chief executive Jack Ma even kicked off the IPO from Citi’s offices on Greenwich Street.
Indeed the year was dominated by foreign issuers listing in the US. “The depth and liquidity of the US market, strength of the dollar and market stability have led many foreign issuers to list here rather than their home markets, and we are a natural partner because of our global and domestic expertise,” says Philip Drury, co-head of ECM for the Americas at Citi.
Citi leads in market share for large foreign listings in the US such as British firm Markit’s $1.5 billion IPO and Israeli firm Mobileve’s $1.8 billion IPO and follow-on. It has also been the year of the financial sponsor in US equities. Carlyle chose Citi to control execution as well as be lead left and stabilization agent on the Axalta IPO. Blackstone, Bain Capital and Apollo have all appointed Citi as an active bookrunner for their monetizations. Drury says that Citi focuses on a solution-oriented approach to sponsors, and the team is respected for its execution prowess and willingness to commit firm capital on behalf of clients.
Away from listings, Citi has been a pioneer in alternative equity structuring solutions. It led the 144a mandatory capital raise to reposition Washington Mutual’s shell (WMI) after its 2012 bankruptcy and assisted KKR in restructuring the board and management to repackage WMI as an acquisition vehicle. It also modified an existing prepaid forward with Jerry Moyes, Swift’s chief executive, over his holdings in the company allowing for more upside participation.
Best transaction services house in North America
Citi also wins the award this year for best in transactions services in North America. It’s been a year of innovation and changing corporate needs and Citi has managed to meet the demand for innovation, while maintaining strong financial results. Over the past 12 months, the annual revenue for the treasury and trade solutions business in the region was $4.1 billion.
In November 2014 Citi launched its Interactive Solutions platform in the region. The platform allows companies to carry out real-time modelling and benchmark their results against their peer group using publicly available data. The platform provides insight on how implementing certain payment services or adopting new strategies would have quantifiable benefits on business. Clients can find the best method to reach their specific operational goals. Used with the Innovation Lab, the Citi-developed software covers liquidity, supply finance, commercial cards, working analytics and payments.
Providing the best services to clients can require making assessments internally as much as developing new products. The bank’s continued strength came from its moves to integrate its businesses, pulling together operations on the cash management and the FX sides of the business to better benefit the clients. The result of this is greater certainty around rates that have been guaranteed for a fixed length of time. The moves also created greater clarity around its own operations internally.
Citi increased ways it can offer support to its clients through the treasury advisory group based in New York. Offering benchmarking solutions, the group operates to enable clients to work towards identifying where improvements can be made to achieve treasury and working capital best practice. In turn, the service helps the bank position itself in an advisory role with its clients, creating stronger relationships.
Best flow house in North America
UBS had almost appeared to drop off the radar in the US after the credit crisis, but last year saw it make a strong return in the flow business where it wins best flow house in North America. Its commitment to clients fed into results. It had top-line revenue growth in the region of 14%, supported by the strong lift in its structured products business as well as record revenues for equity derivatives. In every asset class the firm has excelled. In direction execution services, UBS’s electronic trading Quant HQ business has won 210 basis points of US market share in new hedge fund mandates since January 2014. UBS ATS has added 50 basis points of US market share to be tied as the largest ATS in the market. It also focused on serving clients’ demands for transparency.
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Bespoke analysis that really enables us to tailor UBS’ hugely customizable algorithmic trading platform to individual clients’ needs Dushyant Chadha, UBS |
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“As one of the largest pools in the US, we have felt that transparency of our operations are key,” say Dushyant Chadha and Mark Holder, co-heads of direct execution services. “UBS has published our Form ATS and rules of engagement online. In addition, we have invested in the technology behind our execution consulting offering, allowing us to undertake bespoke analysis that really enables us to tailor UBS’ hugely customizable algorithmic trading platform to individual clients’ needs.”
In structured notes the firm created its UBS Equity Investor Platform that provides users with the ability to design and deliver customized structured note offerings to clients for a minimum investment size of $100,000. Some 2,275 of the 2,877 deals traded in 2014 were executed through that platform, and the firm ranked number one for SEC registered deals traded last year. Over the last 12 months UBS consolidated its position among the top three investment banks for electronic FX.
Above all, the co-heads say the firm has focused on content, access and consistency: “We have tried to ensure that we provide consistent pricing and servicing for customers. We have had feedback from customers that they have come to rely on UBS as a place where they will receive a consistent experience. The feedback has been that customers will receive a competitive pricing level with a quick turnaround time. This is important for customers since they have finite time to accomplish what they need to accomplish and they cannot afford to waste a call to a dealer that will not be competitive or be too slow in turning around a request.”
Best risk adviser in North America
When it comes to managing risk in North America, it is HSBC that stands out from its peers over the past year. It may not win on scale but it wins on relevance to North American clients – and that relevance is growing. This year it receives the award for best risk adviser in North America.
Since April 2014 it has executed $7.3 billion in cross-currency swaps in the US and Canada – $4.3 billion more than in 2014. The intricacy and depth of some of the hedges it has coordinated have been impressive. HSBC was the lead on a $3 billion deal-contingent hedge for a project financing. Extensive risk advisory work was performed over a nine-month period, including project- and sponsor-level analyses of bank financing and likely bond take-out scenarios, incorporating different hedge amounts, rate hedging products, potential rate paths and generated reports on sponsor internal rate of return simulation, coverage ratio and liquidity breakage simulation. The bank was the sole lead and coordinator on a $1 billion hedge for a large US consumer products firm, and the market risk lead for a $2 billion interest-rate derivative swap for a large US technology company. In currency risk, HSBC provided Canadian firms with the ability to issue in Australian dollars and swap back into their domestic currency. Its FX advisory group also made 190 client visits in north America last year to discuss the FX risk of foreign subsidiaries to US firms or currency and revenue risk.
“Earnings hedging has become a bigger topic this year – a lot of companies have overseas earnings in euros – so we worked on several transactions there,” says Martin Kessler, head of markets corporate sales, at HSBC.
Kessler joined the firm from BAML in 2011 and has seen first hand the commitment HSBC has put into becoming a key adviser on managing risk exposure. “Four years ago I couldn’t say we were the best in the market when it came to providing solutions to clients. But we have invested time and resources into being able to advise on large hedges and more complex and bigger solutions and provide products around that. The fact we are now considered alongside the biggest domestic investment banks and win lead positions is a real example of that”.
Best bank in Canada and best investment bank in Canada
In Canada it would be difficult to ever oust from the leading positions the two stalwarts of the financial industry: TD Bank and RBC Capital Markets. This year they continue their reign. TD Bank is Euromoney’s best bank in Canada, while RBC Capital Markets wins best investment bank in Canada.
TD Bank underwent a change of leadership in our review period. Long-serving CEO Ed Clark retired, to be replaced by former COO Bharat Masrani.
When it comes to retail banking TD Bank simply gets it right with clients, and that is reflected in its earnings. Shareholders benefit too. The bank finished last year with total adjusted earnings of $8.1 billion, with total shareholder return of 20% and a 14% year-over-year increase in dividend payout. Its Canadian retail bank delivered record adjusted earnings of $5.5 billion after 550,00 new Aeroplan customers joined the bank. TD became the primary issuer of Aeroplan Visa credit cards in January last year after acquiring around half of the existing Aeroplan credit card portfolio from CIBC. And those earnings went back to the customers. In July last year 20,000 employees handed out $20 to every customer in 1,100 branches. Customers using phone and online banking during that time also received $20.
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TD CEO Bharat Masrani inherits a global leader in retail banking innovation |
TD Bank is a leader not just in Canada but also globally in retail banking innovation. Over the last 12 months it has announced a number of technology developments including TD Mobile Deposit that allows eligible personal and business customers to deposit cheques into their bank account by photographing or scanning the original. In 2014, TD signed a five-year agreement with Communitech, a technology hub based in the Waterloo Region, to explore innovation, with a particular focus on customer experience. The agreement covers a range of themes, including entrepreneurship, growth, international business development and women in technology.
In 2014, TD also obtained exclusive Canadian distribution rights to Moven’s industry-leading real-time, mobile-based money management app. The first of its kind in Canada, the Moven app will operate alongside the TD mobile banking app and help customers to manage their spending habits by linking their TD banking activities in real-time to their savings goals.
Best investment bank in Canada
In investment banking it is RBC Capital Markets that leads in every sector. It has a 23% market share of M&A deals in Canada, an 18% market share of equity deals and a 21% market share in DCM. It ranks first in every league table across those sectors.
The success can be attributed to the long tenure of its senior leaders. Peter Buzzi who heads M&A, Kirby Gavelin who heads ECM, Rob Brown and Patrick MacDonald who head DCM have been in place for years – and it shows. The investment bank has not had to deal with disruptive transition or restructuring, enabling it to do what it does best. Among the M&A deals that the business advised on was the $12.8 billion merger of Tim Hortons with Burger King, creating the world’s third-largest fast food company. It also advised on BCE Inc’s $6.9 billion privatization of Bell Alliant Inc. RBC CM acted as sole adviser to BCE on the transaction to simplify its operating structure and support a number of BCE’s and Bell Alliant’s strategic growth opportunities.
In cross-border deals no other Canadian bank does better – and almost 50% of M&A deals last year were cross-border. Whether advising on deals with foreign acquirers of Canadian assets or Canadian buyers or sellers of foreign assets, RBC Capital Markets ranks top, according to Dealogic. In equity capital markets RBC’s retail distribution and research has enabled the investment bank to consolidate its leading position. From April last year to May this year the investment bank underwrote 65 transactions raising C$9.5 billion ($7.7 billion). On the most important deals RBC Capital Markets was lead left: deals such as Seven Generation’s C$931.5 million IPO that took place during a sharp fall in energy-sector prices and still ended up being over-subscribed. Cenovus Energy’s C$1.5 billion bought deal treasury offering of common shares was also executed in a time of high volatility – the second-largest energy follow-on transaction since 2008.
In debt capital markets RBC led 107 corporate transactions totalling nearly C$40 billion over the 12 month period ending in April this year. It was a period of elevated new corporate issuance, and the bank led six of the 11 largest offerings and was bookrunner on 57% of the issuance. Among the biggest deals were Telus’ C$1.05 billion dual-tranche offering and Choice Properties C$1 billion four-tranche offering. It was the choice for inaugural issuers also in the Canadian markets, acting as bookrunner on C$5.4 billion in total volume of initial debt offerings across 17 transactions. GM Financial and Westjet were among those issuers. It leads in sectors such as financials where it acted as joint bookrunner for the Toyota Credit Canada’s C$500 million five-year senior note offering completed in February, with the 1.8% coupon marking the lowest five-year automotive finance coupon ever achieved in the Canadian market.
In infrastructure the bank is a leader with deals such as that of Toronto Hydro. There the bank was bookrunner on the C$200 million long 30-year offering, with the lowest long-dated coupon on record.
