Awards for Excellence: Asia

Best bank: HongkongBank
Best consumer bank: Citibank
Best cash-management bank: Citibank
Best treasury: HSBC Markets
Best sub-custodian: HongkongBank
Best trade-finance bank: HongkongBank
Best securities firm: Jardine Fleming

In these difficult times, Euromoney‘s best bank in Asia is, appropriately, a bank that has been operating there for over 130 years and has seen the odd regional problem before. With 680 branches across Asia – the biggest network of any bank – HongkongBank has a reputation among its clients for stability. Above all, it is admired for its reluctance to cut its credit lines to good clients that have fallen on hard times.

It understands the region, as do those who sit in London managing HSBC group – HongkongBank’s parent – if only because they have spent the bulk of their careers with HongkongBank in Asia too. That tends to mean that HongkongBank rarely suffers from the knee-jerk reactions of European and US banks.

Meanwhile Citibank is quite simply the benchmark for retail banking in Asia. It has a presence in virtually every Asian country and gains about 50% of its in-country revenues from consumer banking. It segments its market by private banking (CitiGold), mass market (credit cards) and professionals (Citibank personal accounts) and has sophisticated data-mining techniques for cross-selling products. It has created one of the strongest brands in Asia – on a par with Coca-Cola or McDonald’s – so it is little wonder that so many of Citibank’s consumer staff are poached by domestic banks.

Citibank and HSBC go head to head in almost every product category. Both have excellent Asian cash-management businesses. HSBC is stronger in certain areas – such as mid-market domestic corporates – and has taken business with multinationals from Citibank. But in the key battleground for mandates to set up regional treasury centres, Citibank is ahead. These centres process transactions from a company’s operations in up to 17 countries and winning mandates is a reflection of cash-management excellence.

Citibank and HSBC are also closely matched in treasury. Citibank has dominated foreign exchange for a very long time and has come first in Euromoney‘s global forex poll every year since its inception. HSBC, however, has come from a long way behind to steal a march on Citi in Asia. Stuart Gulliver’s appointment as regional head of treasury in 1994 resulted in a reorganization of the treasury, with as much as possible centralized in Hong Kong. Before that, each country ran its own treasury as an independent entity.

Gulliver’s cultural revolution and the workaholic culture that pervades his senior management have brought results. According to independent surveys, HSBC is winning the battle for business even in Citi’s traditional strongholds. In the Philippines a senior ex-Citibanker at a local bank says that HSBC is on a par with Citi today. In Hong Kong, India and Malaysia HSBC is exceptionally strong. HSBC convincingly won Asiamoney‘s Asian forex poll in April.

Meanwhile, profits from the forex dealing floor are increasing, rising 62% in 1997 in spite of the turmoil. It is also clear that HSBC has won friends in central banks across the region for the responsible way it has approached trading. All in all it has been a remarkable year for Gulliver’s team.

HongkongBank Securities Services ranks as Asia’s best sub-custodian; that is, it is the bank with the best local reach. HongkongBank is the biggest custodian in Asia for foreign investors, with over 300 institutional clients from 40 countries and assets under custody of over $160 billion. It operates in every Asian country from Sri Lanka through Bangladesh to Myanmar, and in Indonesia, for example, it has 330 people working in securities services alone.

Its clients include top global custodians Bank of New York and Chase. The number of transactions it has processed grew from 200,000 in 1991 to 1.3 million last year. According to Global Custodian magazine it is top rated in 11 Asian markets and is considered best in eight of them. In Asiamoney‘s poll it ranks top in eight of 12 countries. A mark of its excellence occurred recently when a prominent Korean bank saw five accounts dispense with its custodial services thanks to the flight to quality. HongkongBank picked up four of these.

HSBC Trade Services is the clear winner of the trade-finance award. HongkongBank was founded on trade over 130 years ago and it has remained a core competence ever since with 680 branches around the region. Within Asia it has two-and-a-half times as many staff as its nearest rival, and the trade floor in Hong Kong is the biggest in the world. In every new branch that opens, trade is a key business area. For example, when HongkongBank’s Dalian branch opened in China with 35 staff, nine of those worked in trade. Last year it established more than 60 fresh relationships with exporters (outside Hong Kong), advised on 500,000 letters of credit and issued 200,000. Steven Irvine

Best bank: HongkongBank

Knowledge comes with pain, and those managing HongkongBank have seen a few recessions in this part of the world. A senior Singaporean banker says he gained his respect for the bank when he saw how it reacted during the recession in Singapore in the mid-1980s. “They cleaned up the loan book in a couple of years,” he recalls, adding that the bank was quick to act, provisioned well and managed to avoid antagonizing key clients. At a time when the Singaporean banks were still dealing with the problem, he says, HongkongBank had returned to fresh lending.

Luckily for the bank, the man that cleaned up the Singapore loan book is now in charge of Malaysia where the bank has M$14 billion ($3.5 billion) of loans. Given the rise in non-performing loans in Malaysia – and they look set to escalate – country head Tim O’Brien has a big task ahead, but at least he has done it before.

Analysts are quick to praise the bank and its management. Morgan Stanley, for example, recently rated it among 20 Asian institutions likely to emerge stronger from the crisis. In a table ranking Asia’s banks by competitive advantage, it was top, with a score of 58 out of 65. “HSBC, in our view, is head and shoulders above the region’s other banks,” says the report. “Although the regional financial crisis will result in greater access to some markets, it is unlikely that many competitors could replicate HSBC’s regional diversity and presence within five to 10 years.”

Fruit salad of brands

There is only one other bank that truly competes with HongkongBank in Asia: Citibank. The US bank has a network that spans Asia and in each country it operates in it has a reputation for innovation and flawless marketing. In fact, the Citibank brand is one of the best known in Asia, in part because it has been so successful in consumer banking.

This is precisely the area where HongkongBank has been caught napping. For too long the bank relied on its old trade-finance relationships, and heady Hong Kong earnings, and in the process ignored the region’s consumers in favour of the corporate bank. The decision to refocus on consumer banking is less than four years old, but already it has strong consequences for the bank.

The question of brand is the critical one. “It’s a subject of quite a lot of debate,” says Aman Mehta, who runs HongkongBank’s international business “There’s a desire for greater commonality of branding.” Across the whole region, the HongkongBank country managers we spoke to all admitted the brand was a central issue that needed to change. Consumer bank head Eric Tai laughs as he says that the bank “basically has a fruit salad of brands.” He adds, “I would dearly love to see us consolidate the name going forward. I’d like to think we’ll resolve it this year.”

The favoured choice would be to switch to HSBC for all markets. For legal reasons the names on cheques would have to be Hong Kong & Shanghai Bank, but signs outside branches and the big-print name on the cheque could carry HSBC alongside the already standard hexagon logo.

Mehta understands the importance of branding. After all, the Indian banker is ex-Citibank – something of a rarity at his seniority level. He can envisage starting the process off in Asia. The upside of using an anonymous four-letter acronym rather than a name that suggests Hong Kong is obvious. In Taiwan, there is enormous rivalry with Hong Kong, so removing the association would be positive. Or take the average Korean who – according to studies – associates Hong Kong with plastic flowers rather than finance. Meanwhile, the bank’s historical client base, the overseas Chinese, call the bank Wayfoong, “source of wealth”, anyway.

The product sides of the bank – for example, HSBC Markets – already carry the HSBC brand. And while the more traditional elements in the bank might think the change unnecessary, it might be a good early move for new HSBC Group boss John Bond to stamp his personality on the organization.

“We would like to be a material player by market share in more markets in Asia,” says Mehta. “That opportunity could present itself in two or three countries in the next couple of years.”

These markets are Korea – where the bank is about to move into its own building with a ground-floor branch – Taiwan, the Philippines and India. In Taiwan it has just opened a new branch and is in definite expansion mode. Citibank is easily the biggest foreign bank in Taiwan, and HongkongBank is playing catch-up. In some areas it is moving quickly. For example, it started a credit-card business in 1996 which is already its second biggest generator of card revenue outside Hong Kong. In India the bank has 200,000 personal banking customers already and 22 branches.

The model is Malaysia, where HongkongBank already has a big and successful consumer-banking operation. Unified branding is not always the order of the day. Its mid-market savings account is called Powervantage – just as in Hong Kong – but the cash card is slightly different. As in Hong Kong, the card carries a lightning-bolt symbol, but it does not have the same pointing finger. That’s because it’s very rude to point in Malaysia.

Dangers at home

Across the region, HongkongBank is a successful corporate bank, and it is the biggest foreign bank in China. The danger for the bank must be that its home franchise, Hong Kong, begins to fall apart with default rates rising as recession deepens. As far as HongkongBank is concerned it would be a problem if the currency peg that links the Hong Kong dollar to the US dollar ever collapsed. Hong Kong contributes 39% of HSBC Group’s revenues – which are reported in US dollars. Any devaluation would hit profits.

These are difficult times for the bank. But its senior international staff have been through difficult times before. While we gave no awards for Indonesia this year, it should be mentioned that HongkongBank stayed open through the worst days of that country’s violent political upheavals.

When the tanks started rolling down the streets of Jakarta, the bank’s country head, Eric Gill, happened to be safely in Hong Kong for internal meetings. Most banks were chartering planes to get their staff to Singapore. But Gill got on the first plane back to the Indonesian capital.

Best securities firm: Jardine Fleming

It’s been a strange year for Jardine Fleming. It has seen it’s biggest competitor, Hong Kong-based investment bank Peregrine, go bankrupt, and it has watched the region it grew with go into a tailspin. This has necessarily hit the business plan – there have been some staff cuts – and also hit profits. In fact, profits were a mere $14 million in 1997, as against $82 million the year before.

Nevertheless, it has been a year of consolidation for the firm. It has rebuilt its reputation since the 1996 scandal surrounding rogue fund manager Colin Armstrong and spent $750,000 on compliance technology.

It has reshaped its research along US lines too, adding a centralized sector-based structure to its traditional in-country approach. Its research continues to be excellent and is one of the firm’s competitive advantages. The firm has also benefited from the retrenchment of its rivals – ING Barings in the Indian subcontinent and Deutsche Morgan Grenfell across the region, for example.

In brokerage, no firm is as dominant across so many markets as Jardine Fleming in terms of market share. The other business areas – equity capital markets and M&A – are excellent too. If the promised M&A boom ever amounts to much, the firm will be well positioned to see the flows. In 1997 it executed 25 M&A deals worth $7.9 billion.

Its convertible bond deals last year for companies including Cosco and Guangdong Investments are also encouraging. For a long time, Jardine Fleming was frozen out of the China business thanks to its shareholder Jardine Matheson, which had moved its listing from Hong Kong to Singapore, and thus upset Beijing. The relationship improved last year when Jardine Matheson taipan Henry Keswick went to Beijing and had an audience with premier-to-be Zhu Rongji.

The demise of the China house of choice, Peregrine, can only be good for Jardine Fleming as well as other houses such as ABN Amro. The Hong Kong stock exchange is forecasting that 200 Chinese companies will list in Hong Kong by 2000: that creates the potential for a lot of underwriting.

Jardine Fleming is an established player. But the firm everyone is talking about across Asia is Merrill Lynch. Jardine Fleming has already had a skirmish with Merrill: the US firm took its Philippines team in 1997. The fact that it was able to rebuild a winning team is testimony to Jardine Fleming’s franchise. And, as its recruitment of top-rated analyst Steve Marvin in Korea shows, it is still able to attract the top talent.

The danger going forward is morale. Jardine Fleming has great people, and it’s clear that people like to work there. But the longer the Asian crisis drags on, the longer profits will be affected. That will make it harder for the firm to stay on top.

China

Best bank: Bank of Communications
Best foreign bank: HongkongBank
Best securities firm: Shenyin Wanguo
Best foreign securities firm: ABN Amro

There are many well-founded concerns about the state of the Chinese banking sector at the moment, especially about the health of the four big state banks which have a heavy exposure to state-owned enterprises. The Bank of Communications is the country’s fifth-biggest bank and is not without its problems. However it has a diverse group of shareholders and since 1993 has operated asset-liability management.

This means that the quantity of loans it can make has been limited primarily by the quantity of deposits that it could attract rather than by imposed loan quotas. Thus it has been largely exempt from the country’s state credit plan. This relative prudence is reflected in the fact that its proportion of loan-loss reserves to assets is a third higher than for China’s biggest bank, Industrial and Commercial Bank.

The most profitable foreign bank in China, HongkongBank, is also the one with the most branches – eight. The most recent to open was in Wuhan in April, making HongkongBank one of the few foreign banks to have a branch away from China’s east coast. The bank has 800 staff and each branch has a mainland Chinese senior manager – all given training in Hong Kong through the bank’s training programme. A total of 45 mainland Chinese have either gone through or are currently undertaking the bank’s management programme. The bank is part of Shanghai’s ATM network, which means customers can withdraw cash at over 1,000 cash machines throughout the city.

Formed by the merger of two of the country’s biggest firms, Shenyin Wanguo commands China’s market in A shares (equities that may be held only by local investors), and has strong ambitions to expand internationally.

It is not the most profitable of the local firms. According to one analyst, a brokerage affiliated to the People’s Liberation Army makes substantially more. But it is thought to be the best managed. However, like any other big securities firm in China, it occasionally runs foul of the authorities. This was the case last year when it and its three biggest rivals were censored for “irregularities”. They were all prohibited from proprietary trading.

ABN Amro has a long pedigree in China and lead-managed the first ever issue of B shares (equities available to foreigners). It actively brokers B shares and last year was active in raising funds for red chips too. In a sparse market for deals in 1998 it stands out for having brought one to market – for Yanzhou Coal Mining in March.

Hong Kong

Best bank: HongkongBank
Best securities firm: Jardine Fleming

HongkongBank is one of the most profitable banks in the world. Consider that on a small island of 6 million people it made $2.9 billion in 1997. That number excludes its regional operations. It has the biggest deposit base in Hong Kong and the most branches. Its cost-to-income ratio is also one of the best in the world at 38.7%. In Hong Kong, it is the only show in town.

In turbulent times, it usually pays to deal with the home team. With Peregrine’s demise, Jardine Fleming has once again reasserted itself as Hong Kong’s foremost broker. Its key strength is its research which consistently wins awards.

SBC Warburg Dillon Read post-merger is one foreign house to watch next year.

India

Best bank: State Bank of India
Best foreign bank: ANZ Grindlays
Best securities firm: DSP Merrill Lynch

State Bank of India is not the most dynamic bank in India but it is conservative – a virtue in these uncertain times. This is reflected in the way it reports. For example, its book value is reported by the bank at around a 20% discount to analysts’ calculations of the adjusted book value. It is also less aggressive than most in growing its loans. In the year ending March 1998 its credit growth was 14.5% compared with the industry average of 15.6%. Its return on equity was 17%.

With 56 branches in 15 cities and 220 ATMs, ANZ Grindlays has the largest retail franchise of any foreign bank in India and has 4 million customers. On the corporate side it deals with 85 of India’s top 100, and has consistently led in arranging cross-border debt financing for Indian corporates.

DSP Merrill Lynch, a joint venture headed by Hemendra Kothari, is a big presence in India. The 350-person firm has recently built its brokerage market share with foreign clients to 16%. In the primary market it has led most of the large deals to come out of India, including the R6 billion ($143 million) privatization of Orissa Power to strategic investor AES Corp of the US.

Malaysia

Best bank: Public Bank
Best foreign bank: HongkongBank
Best securities firm: RHB Securities
Best foreign securities firm: Jardine Fleming

The Malaysian banking sector is in trouble. Loans amount to more than 150% of GDP and bad loans may hit 25% this year. Public Bank is the most cautious Malaysian bank. It has the lowest loan-to-deposit ratio at 69% and is the best reserved with a loan-loss ratio to bad and doubtful loans of over 200%. This perception of safety is aiding it, along with MayBank, to attract deposits from the many weaker banks in the system.

HongkongBank is one of the biggest banks in Malaysia, and among foreign banks it has an unusually big reach, with 36 branches. This position will be further improved by the decision to allow the bank to relocate four of its branches. This should further help it boost its deposit base which at year-end 1997 was M$17 billion ($4.2 billion), a full M$10 billion bigger than Citibank’s. The deposit base has benefited from a flight to quality, growing 31% on 1996. It is also the most profitable of the big Malaysian banks, reporting net income of M$743 million in fiscal 1997.

RHB Securities is almost alone in offering international standards of broking excellence. Its research is highly regarded and founder and controlling shareholder Tan Sri Rashid Hussain wants to keep it that way. Last year he publicly refused to bend to pressure to sweeten his research on Malaysian Airlines.

Jardine Fleming has a good market presence, and local firms rate it the best of Malaysia’s foreign securities houses though it too has suffered in the slump.

Pakistan

Best bank: Not awarded
Best foreign bank: Citibank
Best foreign securities firm: Jardine Fleming

One of Pakistan’s choice employers, Citibank continues to impress and recruit some of its very best staff from Pakistan.

One of the great beneficiaries of the ING Barings decision to exit the Indian subcontinent, Jardine Fleming has seen its brokerage market share soare from 15% of foreign business in July last year to 35% in May.

Philippines

Best bank: Bank of the Philippine Islands
Best foreign bank: Citibank
Best securities firm: Abacus Securities
Best foreign securities firm: Jardine Fleming Exchange Capital

The oldest and most conservative of the local banks, Bank of the Philippine Islands is the analysts’ choice. Its steady approach led these same analysts to label it “stale” when markets boomed, but aggressive expansion is now less fashionable. During 1997 the bank boosted provisions to fully cover non-performing loans and raised the ratio of capital to risk assets from 17.9% to 18.6%. Its major shareholders include JP Morgan and the Catholic Church.

With over 1,400 employees, Citibank is the oldest and largest foreign bank in Manila. It has long been a training ground for the best Filipino financial talent and 98% of its staff are local. However, while this is one of Citibank’s strongest Asian franchises, ex-Citibankers warn that the US bank’s position is being eroded by very strong competition from both foreign and domestic institutions.

Abacus Securities is the largest domestic firm and the only one to make it into the foreign-dominated big league. In the first quarter of 1998 it recorded the sixth-biggest market share of 2.5% behind five foreign firms.

Jardine Fleming has made a remarkable comeback in the Philippines. In the first quarter of 1998, it recorded a 13% share of the stock exchange’s total turnover, beating off Merrill Lynch. This was less than a year after Jardine had rebuilt its team from scratch having seen its staff poached by Merrill en masse. With close connections to the new administration of Joseph Estrada, the 75%-owned joint venture with Exchange Capital is now well placed to win privatization mandates.

Singapore

Best bank: Development Bank of Singapore
Best foreign bank: HongkongBank
Best securities firm: Vickers Ballas
Best foreign securities firm: Merrill Lynch

Singapore’s banks have taken a knock of late. The Asian crisis has hit regional loan books and the recent appointment of John Olds as chief executive of state-controlled Development Bank of Singapore (DBS) has sent out a strong signal that the government wants change. Olds is the first non-Singaporean to run a bank in the Lion city. One local bank analyst calls it the “most significant event of the year – the crisis aside”.

What was formerly thought of as a weakness of DBS – a virtual non-presence in neighbouring Malaysia – now looks a blessing. Its exposure to Malaysia is only 3.8% of total assets, compared with 16.3% for United Overseas Bank or 16% for Oversea-Chinese Banking Corp.

Both Citibank and HongkongBank are very strong in Singapore. HongkongBank, for historical reasons, has a deeper client base. But HongkongBank is seen as the stronger competitor because of its Chinese roots and reputation for stability. One very senior executive comments that HongkongBank is “usually considered by us as a local bank”.

A strong Singaporean firm that has expanded into a regional operator, Vickers Ballas is respected for its research and competes head-on with foreign rivals for non-Singaporean business.

The former Smith New Court business was particularly strong in Singapore. Married with Merrill Lynch‘s US client base, the firm is regarded even by its rivals as having the biggest market share.

South Korea

Best bank: not awarded
Best foreign bank: Citibank
Best securities firm: not awarded
Best foreign securities firm: Jardine Fleming

The Korean economy faces some stark choices in the coming months despite the recent IMF rescue and successful sovereign international bond issues. One of the most painful of these choices will be how fast and radical the restructuring of the banking system should be.

Whatever happen the banks are bound to suffer. No one institution stands out as having been any worse or better managed through the crisis because no Korean bank has a distinctive management style. This is at the root of the country’s problems. Bankers lend more according to quotas than credit risk. That is why the chaebol (industrial conglomerates) have debt-equity ratios of over 500%.

The local securities firms are also difficult to fathom, although less so than the banks. The biggest are owned by the top chaebol. According to foreign investors, they pose too great a counterparty risk to bother dealing with.

Korea is an unusual country for Citibank given that it has 11 branches rather than the one or two it has in other countries. In 1997 its scale was reflected in its being substantially the most profitable foreign bank making W289 billion ($207 million), and having led Korea’s debt restructuring in New York.

Jardine Fleming is Korea’s biggest securities firm by market share, and its investment in Korea was recently underlined by its move to new, larger offices, and the hiring back from Ssanyong Securities of top Korean analyst Steve Marvin – known in Seoul as the “million dollar man”. These are nevertheless challenging times for the urbane Edward Campbell Harris who runs the operation. Flight to quality notwithstanding, volumes are sharply lower.

Taiwan

Best bank: Shanghai Commercial & Savings Bank
Best securities firm: Capital
Best foreign bank: Citibank
Best foreign securities firm: Jardine Fleming

Shanghai Commercial & Savings Bank topped our inaugural emerging-market bank ratings last September. A medium-size bank, it has a return on equity of 18%, far exceeding the Taiwanese industry average of 11%. Its non-performing loans are 2.25% compared with an average of 3.5%. It is the 16th-largest bank by assets, but by any definition is a blue chip, and has ambitions in greater China: it was established in Shanghai in 1915.

Considered among the most professional of Taiwan’s brokers in a market where secrets are kept for about as long as it takes to pick up a telephone, Capital is the favoured choice among foreigners.

In 1997 Citibank‘s earnings before tax in Taiwan were NT$5.7 billion ($163 million), nearly six times more than its nearest foreign rival. This is its most profitable Asian franchise and the fourth most profitable anywhere outside the US. It has over a million credit cards in Taiwan and 140,000 banking customers.

Jardine Fleming‘s Taiwan operation, run by David Hsu who joined the operation over 10 years ago, is seen by most Taiwanese as more local than foreign. As well as servicing foreign clients it has a local retail operation and the biggest market share of any foreign-owned house by a big margin. With the Chinese name “happy and rich”, this is one of Jardine Fleming’s most successful franchises.

Thailand

Best bank: Thai Farmers Bank
Best securities firm: Merrill Lynch Phatra Securities
Best foreign bank: Citibank

If any bank has shown that it is well placed to weather the current storm, the relatively well-managed Thai Farmers Bank is it. It recently recapitalized in the international markets and has a tier-one capital ratio of 10%. Its deposit base and franchise remain strong.

The recent decision by Merrill Lynch to acquire a controlling 51% stake in Phatra is a sensible one. The firm is widely regarded as the best of the local players in Thailand and the link-up with Merrill should provide synergy. Phatra had a 7.8% share of trading volumes in the first five months of 1998.

Citibank has achieved a great deal during its short 13-year history in Thailand. It ranks first among foreign banks by deposits and capital.

Australia

Best bank: Commonwealth Bank of Australia
Best foreign bank: Citibank
Best securities firm: JB Were
Best foreign securities firm: Credit Suisse First Boston
Highly recommended: ABN Amro

Australia is probably the most interesting banking market in the world right now. Australia’s banks are following diverse strategies, some of which get to the root of the question of what a bank is supposed to be.

Commonwealth Bank of Australia is very well run. Like Lloyds TSB in the UK, it has, to investors’ delight, focused on its core competence of consumer banking, and it enjoys the highest return on equity (over 18%) of any of the country’s four big banks The bank has made a remarkable recovery given its roots as a state bank privatized in the early 1990s.

Citibank‘s innovative approach continues to win it plaudits in Australia and it remains the country’s leading foreign bank. The bank’s presence has put local banks under pressure to sharpen up their act.

JB Were is Australia’s only domestic securities firm left. But it remains a dominant player, especially in pure agency brokerage. It was one of the three global coordinators in the privatization of Australia’s telecoms operator Telstra. It is a favourite with UK investors.

Considered to have the best research team in Australia, CSFB was one of the global coordinators on Telstra and also played the same role on the more recent privatization of insurance company AMP.

Japan

Best bank: Sumitomo Bank
Best foreign bank: Citibank
Best securities firm: Nomura
Best foreign securities firm: Merrill Lynch

Japanese banks inspire fear of still more bad news rather than exciting the imagination. But Sumitomo Bank has reserved 85.6% of its non-performing loans, and still managed to raise its BIS ratio from 8.8 to 9.2. It also has the lowest ratio of bad debts to loans of the majors. Bad loans comprise 4.1% of total loans.

Citibank is consistently the best foreign bank. It has raised standards in Japanese consumer banking almost single-handedly. It began the first 24-hour ATM service, something that most people outside Japan take for granted. Sanwa Bank recently followed its lead and other Japanese banks plan to do the same. On the corporate side, it is also innovative as this year’s ¥63.8 billion ($443 million) securitization of corporate bank loans for Sumitomo Trust demonstrated.

Nomura has recovered from last year’s scandal and is widely regarded as the only Japanese securities firm capable of making it alone. Its capital base far exceeds that of any of its competitors, as does its market share.

Even before Merrill Lynch decided to acquire Yamaichi’s branches and some of its staff, it was the clear leader among foreign firms in Japan. Its place inside the top four brokerages by volume had already been achieved, and on some days it has seen the biggest turnover.

New Zealand

Best bank: Westpac
Best securities firm: BT Alex Brown

With its acquisition of Trustbank last year, Westpac has raised its presence in New Zealand to a new level. Analysts are keen on its consumer-focused strategy.

Bankers Trust purchased top broker Doyle Patterson Brown a year ago and recently changed its name to BT Alex Brown. The firm has around 16% of brokerage turnover, and executed one of the key deals of the year in April, the acquisition of Lion-Nathan Breweries by Kirin of Japan.

Central Asia

Best bank: ABN Amro
Best securities firm: Global Securities

No local institutions are yet large enough to provide regional coverage for this part of the former Soviet Union. Linguistic and cultural links have encouraged a number of Turkish institutions to set up offices – DemirKyrgyz Bank (in the Kyrgyz Republic), Ziraat Bankasi (in Uzbekistan) and Azer Turk Bank (in Azerbaijan) for example – but again they have no regional presence.

ABN Amro has opened offices in Tashkent and Almaty and provides securities services for investors looking to invest in the small but growing stock and bond markets of the region.

The bank’s presence in Baku is not through a standalone vehicle but through a partnership with one of Azerbaijan’s four big institutions – Prominvest. Because of its on-the-ground presence in the three potentially largest economies in the region, ABN Amro has stolen a march on competitors such as Deutsche and Citibank which have set up only in Kazakhstan. Simon Brady

Azerbaijan

Best bank: International Bank of Azerbaijan
Best foreign bank: British Bank of the Middle East
Best foreign securities firm: Global Securities

Azerbaijan’s banking system is dominated by four specialized state banks that control 85% of banking assets. The only one operating close to international standards is the International Bank of Azerbaijan (IBA). All four state-owned banks were put under a World Bank/IMF restructuring plan that includes foreign partners. IBA’s partner is CCF.

Despite the need to regroup after defections from its team, Global Securities‘ research and access to local brokers is still superior to that produced by such firms as AJG and Minaret Securities.

Some other firms have also drawn the ire of the regulators having fallen foul of the complex rules governing the voucher privatization process – to the detriment of their foreign investor clients.

Kazakhstan

Best bank: Kazkommertsbank
Best foreign bank: ABN Amro Bank Kazakhstan
Best securities firm: Kazkommerts Securities
Best foreign securities firm: Global Securities

Kazkommertsbank (KKB) is Kazakhstan’s largest private-sector bank. With its two main rivals it controls half the banking market in the country. It provides commercial banking services to large and medium-size Kazakh companies. Its main products are trade finance and short-term credit facilities in tenge and foreign currencies.

In July 1997 it became the first Kazakh entity to issue ADRs and in 1997, its capital-adequacy ratio was 31%, return on assets was 6.14% and return on equity was 25.6%. It also owns significant stakes in the largest companies in the oil, gas, airlines, telecom and chemicals industries.

The partial privatization of rival Halyk Savings Bank of Kazakhstan will increase the efficiency of KKB’s largest competitor: state-owned HSKB is the largest bank in the country by assets, the largest taker of deposits and the leading participant in the primary domestic securities market.

KKB has a 20% stake in ABN Amro Bank Kazakhstan, the largest foreign bank in the country. It is already a significant competitor in corporate banking, capital markets and transaction services such as custody and will become a major player in the next three years. ABN Amro Rothschild was also selected to advise on the sale of up to 4.5% of Kazakhtelecom, the national telecoms operator.

The securities market in Kazakhstan is embryonic. The stock exchange has been working only since September and few stocks are listed, but two local firms produce good research and trade equities, T bills and bonds.

Turkish broker Global Securities‘ joint venture with KKB, GlobalKazkommerts Securities, was the dominant securities house until it was unwound – it was formally dissolved in December.

Global Securities and the newly formed breakaway, Kazkommertz Securities, still produce the best research on the country although competitors are springing up, notably Regent European Securities and Minaret Securities, the latest venture of Czech voucher king Viktor Kozeny. Global Securities has also won a number of privatization mandates and has strong relationships with the types of international investors who go for these frontier markets.

Kyrgyz Republic

Best bank: Mercury Bank
Best foreign bank: Demirkyrgyz Bank
Best foreign securities firm: Global Securities

With official stock market turnover of just $1,000 a day and a treasury-bill market with outstandings of just a few million dollars, the Kyrgyz Republic deserves the description pre-emerging market. That said, both Merrill Lynch and Nomura Securities have visited Bishkek to pitch for privatization mandates and specialist international investors are interested in both the debt and equity markets.

Mercury Bank is one of four banks chosen by the EBRD to act as intermediary in its small and medium-size enterprise loan scheme and is the dominant local player.

Demirkyrgyz Bank is a joint venture of Turkey’s Demirbank. Global Securities is the only foreign broker with a presence in the country – and is close to both the government, local corporates and the local brokerage community from which securities are often sourced.

Uzbekistan

Best bank: National Bank of Uzbekistan
Best foreign bank: ABN Amro Bank NB Uzbekistan

Uzbekistan has not pursued the same policies as the other central Asian republics. Its currency, the som, is not freely convertible and the state continues to dominate the banking system and lending policies.

The National Bank of Uzbekistan (NBU) is the largest institution with the best connections. ABN Amro‘s venture in the country is the largest foreign joint-venture bank in Uzbekistan. Its minority shareholders are NBU itself, the IFC and the EBRD. The other foreign joint-venture banks are Uzbekistan-Joint Venture Bank and Uzprivatbank, whose foreign shareholders are AIOC and MeesPierson.

The stock exchange is not yet fully up and running – there is no true market capitalization figure – so it is premature to talk about a best securities house. That said, a large number of broker/dealers have been set up and trade with each other on the exchange and in an OTC market. Simon Brady

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