Awards for Excellence 2002 Best Bank: Deutsche Bank
Best debt house: Deutsche Bank
Best equities house: UBS Warburg
Best M&A house: Merrill Lynch
Best at risk management&treasury: Deutsche Bank
Best at cash management: Deutsche Bank
Best at custody: BNP Paribas
Our award for best bank in Europe this year goes to Deutsche Bank which has the distinction of being the only European bank to have pushed its way into the ranks of the global players with operations in 70 countries. Though at home it is experiencing the same difficulties as the other German banks, which are all struggling to make a profit in a market dominated by public and savings banks, it still deserves this prize for the quality of its corporate and investment banking franchise.
The breadth of Deutsche’s expertise is clear from the fact that it wins four out of seven awards in Western Europe and in the areas where it misses out, with the exception of M&A, it is still a strong contender. It has sizeable securities services operations globally and its equities division is highly regarded, particularly in the area of derivatives.
The bank is split into two divisions – corporate and investment banking (CIB) and private clients and asset management. CIB comprises corporate banking and securities on one side and transaction banking, mainly treasury services on the other.
May 2002 sees Josef Ackermann step into the shoes of chairman Rolf Breuer, who will be appointed to the supervisory board. It’s likely that Ackermann will concentrate on bolstering Deutsche’s investment banking capabilities no doubt in the hope that, when business swings back towards equities and M&A, it will be in a position to snap up some of that business from the clients it has served on the debt side.
Those have been many and varied this year, securing Deutsche the award of best debt house in Western Europe. Being able to provide its clients with capital has clearly been an advantage. Head of debt capital markets, Jorge Calderon, says that Deutsche is not shy about stating that it will use its balance sheet to help valued clients. This gives it an important advantage, particularly as other banks are winding down their loan commitments
In the loans market, it has handled some of the most significant and successful transactions this year across the credit spectrum. Among them were large commitment post-September 11 for the likes of Italenergia, Klockner Pentaplast and MMO2.
Among the lead management assignments in the bond market was for Innogy, which did a £300 30 year tranche and a E500 million five year, a significant achievement for a BBB credit. Innogy managed to avoid using covenants on the deal which, says Calderon, was pulled together in just a week.
Deutsche is at the forefront of innovation in Europe, often testing the limits of the euro market and has a series of first-evers to its name. It was responsible for the France Trésor OATi, the first pan-European inflation linked benchmark bond pegged to eurozone inflation. For Kappa, it raised the largest senior debt tranche ever for a European LBO at E1.75 billion. This was entirely euro-denominated and placed in Europe – where it was previously thought that the pockets of fixed income investors were not deep enough to do deals of this size.
This year it has been actively making markets in “fallen angel” and crossover credits such as Alcatel, Ericsson, KPN and Sonera, which it offers to investment grade and high, yield investors. It has also been particularly focussed on building the loan trading business in Europe, particularly in non-investment grade paper. All of the high-yield deals Deutsche brings to market are companies with which it has a lending relationship, something it believes give investors additional confidence in the firms’ credit-worthiness.
Closest competitor Citigroup has shown real signs of progress across Europe this year, pumping resources into core markets such as Germany and Italy. It has made progress in the sterling market – Deutsche’s weak spot – and in asset backed. However, unlike Deutsche, Citigroup is not particularly strong in credit research and has not been very focussed on the new issue research for which investors have been baying. Fund managers also say it is not as strong as Deutsche in secondary market trading.
Last year we said that UBS Warburg had the most momentum in the European equity markets and clearly, it hasn’t let any of that go to waste over the past twelve months. At the same time, cracks have been appearing in the foundations of its long-time rivals. Goldman Sachs, previously one of the strongest equity houses in Europe is currently struggling to update a business model that is heavily skewed towards tech-related, big primary market transactions that are now scarce.
Merrill Lynch meanwhile has a strong franchise in certain countries in Europe but cannot boast the same Europe-wide footprint as UBS.
The Swiss bank also has a powerful weapon in the form of its superlative research capabilities. It swept the board in a number of independent surveys of research analysts recently. This pre-eminence helps ensure that UBS does a high volume of secondary trading on all of the major European stock exchanges.
James Garvin, joint head of equity capital markets at UBS with Lucinda Riches, puts the bank’s success down to the implementation of a country sector matrix. It has teams of bankers on the ground across Europe, or at least based in country offices for part of the week. Merrill is the only other bank with a similar approach, Goldman and Morgan Stanley run their European businesses largely out of London.
UBS has been excellently positioned to capitalise on this year’s themes: a predominance of secondary market business which means that its huge sales and trading machine comes into its own; the rebirth of the rights issue and an upswing in equity-linked business; as well as a move towards smaller transactions.
In order to tap into the SME market, UBS has a team dedicated to small and mid cap corporates in corporate finance, sales and research. So if the bank is not doing the big deals for Vodafone – which, as it happens, it has done this year – then it has plenty of other deals on the table.
The bank was joint bookrunner on both the £3.5 billion block trade for Vodafone in May, with Goldman Sachs, and Royal Bank of Scotland’s £2 billion issue along with Merrill Lynch. It was the only bank to be bookrunner, sponsor and financial adviser to ICI on its rights issue.
Outside of the UK it has been involved in significant transactions in almost every European country. In Italy for example it handled two benchmark IPOs – Campari and the much larger E1.7 billion deal for SNAM Rete Gas. It ran a E1 billion exchangeable for the Greek government as well as smaller issues in Spain, Germany, Switzerland and the Benelux region.
On the equity-linked side, it has helped several firms to use convertibles as a treasury tool. Carlton Communications did an exchangeable to monetise a stake in Thomson Multimedia, for example and Legal&General raised £525 million to buy its fund management business out of its insurance subsidiaries by way of the largest ever sterling convertible.
Other innovative transactions this year include a MILES issue for Zurich Financial Services, which ties the conversion price to Zurich’s share performance versus the SMI. Also for Zurich, it was bookrunner on the floatation of Converium. This transaction – which used a structure to ring fence losses related to September 11 – won praise from a market that doubted the feasibility of a 100% IPO of a re-insurance company less than two months after the attacks.
The leading light in European M&A in Europe this year is clearly Merrill Lynch It ranks consistently among the top three houses in the most important markets in Europe and where it doesn’t come first, has invariably been involved in significant transactions.
In the UK, it worked Apax and Hicks Muse Tate&Furst on the purchase of Yell, BT’s directories business and, again in the private equity arena, with Nomura to acquire Le Meridien Hotels. It also advised BT on the demerger of MMO2 and Halifax on the Bank of Scotland acquisition
Merrill completed one of the most complex deals in Europe last year in the shape of the three-way merger between Usinor, Aceralia and Arbed, which involved three nationalities – France, Spain and Luxembourg – for $3.1 billion.
It has been particularly strong in financial services and worked with Caisse des Dépots et Consignations (CDC) d’Epargne and Caisse Nationale des Caisses d’Epargne on their partial merger – tricky given their status as a publicly owned bank and a mutual institution respectively. BNP Paribas took its advice on the acquisition of the minorities of BancWest as did Halifax on its $7.7 billion bid for Bank of Scotland and Unicredito on the purchase of interests in five regional Italian banks.
Other important transactions on which Merrill was instrumental was the sale of Reemtsma to Imperial Tobacco Group, on which it advised Reemtsma. It was also the main advisor to highly acquisitive utility RWE on its successful bids for American Water Works Transgas and Innogy over a six-month period. Meanwhile in Italy, it helped Pirelli and Benetton to buy Bell, thereby gaining control of Telecom Italia.
In recognition of its strong commitment to corporate transaction banking, Deutsche Bank wins the award for best at risk management and treasury in Western Europe. It is the biggest arranger and dealer of MTNs and euro-denominated commercial paper and ranked number three in Euromoney’s foreign exchange poll this year, scoring particularly highly in interest rate swaps and OTC currency swaps as well as euro exotic options.
Its derivatives business is divided into three units: institutional and brokerage which primarily serves insurance companies and hedge funds, direct and indirect retail – where Citigroup has traditionally dominated – and corporates and financial institutions.
This year it provided a derivative structure to allow Vivendi to monetise its stake in BSKyB. At E4.2 billion, it was the largest corporate derivative ever done. Though the Enron debacle has cooled CFOs enthusiasm for clever structures, Deutsche boasts of a huge pipeline of deals.
Deutsche’s success is down to the fact that it combines a high-volume flow business with one-off, highly structured transactions. It is a self-styled flow-monster – an important precondition for a top ranking derivatives house but also employs a team of 15 dedicated lawyers to work on the clever stuff.
In order to simplify the highly complex world of risk management for its customers, it has established a structured products group and these bankers can talk to clients about the full range of risk management products. This approach often results in the bank doing a hybrid transaction that might involve fixed income and foreign exchange derivatives or equity derivatives and inflation products.
Currently it is advising corporates concerned about how to mitigate their exposures to volatile markets and manage their balance sheet optimally.
It is also working -on a system to allow customers to mutualize risks where the underlying cannot be traded, such as GDP rises and inflation. Using proprietary technology – developed in conjunction with Goldman Sachs – it hopes to begin running auctions in September to allow customers to trade off risks that previously they just had to live with.
UBS Warbug also deserves a mention this year for the quality of its risk management division. It has an impressive franchise in flow derivatives and structured products, having worked with a number of large European corporates over the past twelve months. UBS also scores highly in industry surveys for derivatives research and sales. However, in terms of sheer scale and muscle it still has a little way to go in order to catch the leader of the pack.
Deutsche Bank is also the top bank for cash management and payments in Western Europe. It provides payment services, liquidity management, information and account services and electronic bill presentation and payment solutions to corporate clients in 17 European countries. It sees the globalization of cash management services as a key priority going forward and this year has expanded its presence in the US with this aim in mind. It is the number one clearer in euros with over 200,000 cross border transactions every day, giving it a market share of 28%.
Some of the companies which have awarded mandates to Deutsche over the last twelve months are Baxter, Dole Europe (part of Dole Food of the US) Dow Chemical and McGraw Hill.
While Deutsche’s capabilities in both risk management and treasury and cash management are beyond doubt, in the custody business, it is BNP Paribas that comes out top for European customers. Securities services was a business that the bank became a significant presence in almost by accident. Paribas acquired the dealer clearing business of JP Morgan in 1995 and, after the merger, this was combined with BNP’s operations to form a business that, until recently has been a well-kept secret.
BNP Paribas Securities Services as the division has been known since 2000, has E2 trillion in assets under management. It has offices in 11 different countries in Europe, out of which it runs a global custody network covering 70 countries.
It is particularly strong in cross border equity clearing in Brussels, Frankfurt, Madrid, Milan and Paris where it is peerless, even among the US banks.
BNPPSS’s unique value proposition is that it is focussed exclusively on servicing European clients. The bank’s commitment to the business was sealed earlier this year with the acquisition of Cogent, an investment management products company with offices in the UK, Ireland, Jersey, Luxembourg and Australia, which has E248 billion under management.
Going forward it intends to continue to build scale through encouraging smaller players in Europe to outsource their custody business to BNPPSS.
AUSTRIA Best bank: Bank Austria Creditanstalt
Best equities house: Deutsche Bank
Best debt house: Citigroup
Best M&A house: Goldman Sachs
Bank Austria Creditanstalt’s marriage with HypovereinsBank in 2000 has only strengthened Bank Austria’s claim to be best bank in Austria. HVB’s “bank of the regions” strategy, which involves keeping two separate brand names according to geographical location, appears to be the right move. Bank Austria’s offices in western Europe and elsewhere abroad have been integrated into HVB and HVB’s branches in central and eastern Europe have been absorbed into the Austrian bank’s network.
Bank Austria’s customers now have access to the services of a banking giant that stretches across Europe while at the same time the name of their local branch has not changed. The bank sees itself as providing a bridge for its clients between eastern and Western Europe and has established satellite offices over the past year in London, France, Spain, New York and Beijing.
It has established an integrated corporate finance division, which, using HVB’s know-how is focused on speeding up the process of introducing customers to which the bank provides loans to the capital markets. It is also in the process of streamlining its sales function in order to unlock the potential of its network of private customers. These include clients of SKWB Schoellerbank, a private bank for high-net-worth individuals, which was a subsidiary of HVB.
Bank Austria is the largest bank by far in the country, with total assets of e160 billion ($152 billion). It now claims relationships with 70% of Austrian corporates, up from 40% five years ago, when it acquired the second biggest bank of Austria, Creditanstalt. It has a 19% retail market share, a figure that it says is nearer 57% in the capital city of Vienna. It continues to gain online clientele and now boasts 280,000 internet banking customers who between them maintain 800,000 accounts.
Few corporates have come to the debt markets in Austria this year. Rather, issuance has been dominated by financials and public bodies. In this segment of the market, Salomon Smith Barney is clearly the major player. It completed Blue Danube in December for the State of Lower Austria. This was a e2.6 billion [?securitization?] deal backed by housing loans granted to individuals, housing cooperatives and local authorities. Citigroup was also bookrunner on a e4.5 billion transaction for the Republic of Austria and a e1.4 billion deal for Oesterreichische Kontrollbank, Austria’s central bank.
In the equity markets, Deutsche Bank stands out for its commitment to secondary-market trading and its primary market expertise where needed. It does twice as much trading by volume as its closest competitors Merrill Lynch and Citigroup. This year it has helped several small issuers to come to market, among them crane manufacturer Palfinger, which did a retail rights issue and simultaneous institutional offering totalling e28 million. Deutsche also ran the IPO of Andritz, a small engineering company that at e45 million was Austria’s largest flotation last year.
As in other markets, M&A deals were few and far between last year but Goldman Sachs helped UK tobacco company Gallaher in its bid to purchase Austria Tabakwerke. Gallaher already had a controlling stake but the completion of the $1.6 billion purchase makes it the fourth-largest cigarette manufacturer in western Europe. Goldman also advised General Medical Systems, a division of General Electric, on its acquisition of ultrasound systems firm Kretztechnik
BELGIUM
Best bank: Fortis
Best equities house: KBC Securities
Best debt house: Deutsche Bank
Best M&A house: ING
The past year has been one of streamlining and refocusing for Fortis, which wins best bank in Belgium this year. It has now completed the integration of the former Generale Bank, which it bought in 1998, and the smaller ASLK-CGER Bank. Customers at all of Fortis’s 1,916 branches nationwide now have access to all its services. Fortis also has a significant private-banking franchise in Belgium under the brand name of MeesPierson, which it acquired in 1997.
In corporate banking Fortis has united all the various and previously geographically dispersed activities under one umbrella to make better use of resources and to maximize cross-selling. The new merchant banking division, headed by Filip Dierckx, comprises four business lines: financial markets, which includes fixed income, foreign exchange and money market products; investment banking. which provides equity capital market and advisory services; information banking, which entails custody, derivatives clearing, securities lending, fund services and prime banking; and private equity.
Fortis has been divesting activities that are considered peripheral to its strategy or are not sufficiently profitable. Among the obvious victims was its brokerage activities in London and its equity and fixed-income trading desks there.
The bank is an important player in trade finance, project finance and commodity finance for Belgian companies. It is also committed to providing acquisition financing to domestic firms and worked on some significant transactions this year including a e1.8 billion ($1.7 billion) facility for Interbrew in November.
KBC Securities, part of bancassuer KBC takes the prize for best equities house this year. It is the most active trader of Belgium stocks, has a well-respected research division and, according to the Thomson Extel survey, is one of the top three brokerage houses for the whole of the Benelux region.
There has only been one significant equity deal in Belgium this year – the IPO of equity exchange Euronext – which was underwritten by BNP Paribas, ABN Amro and UBS Warburg. BNP was also involved in the e98 million secondary offering of Omega Pharma along with Petercam. However, neither of them has demonstrated the same strong commitment to the secondary market as KBC, though Petercam’s research is still well regarded.
On the fixed-income side, Deutsche Bank is the winner. As well as its strong standing in issuing debt for Belgian companies, Deutsche has a share of over 50% of the loan market, lending six times that of its closest competitor, Barclays. It was recently joint bookrunner on a deal that enabled Belgian supermarket group Delhaize to raise $2.6 billion and helped chemicals group Solvay to borrow e700 million. Deutsche is less strong in financials, a market segment that is dominated by issuance from pan-European banking group Dexia but has been involved in bonds issued by the Kingdom of Belgium over the past 12 months.
The award for best M&A house goes to domestic [in what sense? It’s Dutch] institution ING Barings, which stands head and shoulders above any other bank in Belgium for the quality of its M&A advice. ING was responsible for around a third of all activity in the country over the past 12 months and among major deals advised Groupe Bruxelles Lambert on its absorption into Electrafina for $7.4 billion. Further down the scale it advised Suez Lyonnaise des Eaux on its purchase of further shares in Tractebel, and Interbrew on its acquisition of 12.6% of Damm for e84 million as well as representing container terminal operator Hesse Noord Natie in its purchase by PSA.
FRANCE Best bank: BNP Paribas
Best debt house: BNP Paribas
Best equities house: Société Générale
Best M&A house: Morgan Stanley
Should Michel Pebéreau, CEO of BNP Paribas, wish to retire from the bank in glory, now would surely be a fitting time to do so. Since the merger in 1999, he has transformed sleepy state-owned Banque Nationale de Paris and overstretched, undermanaged Paribas into a force to be reckoned with. BNP Paribas is beyond a doubt the pre-eminent corporate bank in France and can boast of success in almost every area of its franchise.
It is now firmly positioned as one of the leading financial institutions in Europe and Pebéreau clearly sees it as a consolidator. He has made no secret of the fact that BNP Paribas is looking for acquisitions, at the right price, and has funds earmarked for this.
Over the past 12 months, the bank has acquired United California Bank as well as the remaining interests of BancWest in California to bolster its retail operations there and has successfully bid for German online broker Consors, which will be combined with its own internet operation, Cortal. It also bought Arval PHH from Avis to bolster its car-leasing business.
BNP is big in the consumer credit business in France. One of the most important retail businesses that Paribas brought to the merger was Cetelem, which has joint ventures with various retail networks such as supermarket chain Carrefour to offer credit cards.
The bank also has a major presence in investment banking at home and abroad. Since losing many of its fixed-income bankers from the former Paribas in the wake of the merger in 1999, BNP Paribas has been working hard to re-establish itself in the European debt markets and has now established itself as the key provider of loans and fixed-income debt for French corporates.
Vivendi Environnement, Valeo, Lafarge, Alcatel and Michelin are among the companies that have turned to BNP to run their bond deals this year. Vivendi Environnement’s e2 billion ($1.9 billion) inaugural issue was oversubscribed by more than three times and the Alcatel deal was increased from an initial e500 million to e1.2 billion.
BNP can boast of success on some tricky transactions. In September, just after the World Trade Centre attacks, it raised e2 billion for Schlumberger, following this up with a e1.4 billion equivalent issue for BBB rated Larfarge to finance the acquisition of UK company Blue Circle. It also competed transactions for a number of similarly rated corporates such as Vivendi Environnement and Groupe Casino.
On the loans side, BNP was a mandater arranged on France Telecom’s jumbo e15 billion financing at the beginning of the year, and on loans to finance acquisition debt repayment for Lagardère and for Pinault Printemps Redoute to acquire a stake in Gucci
Société Générale wins the award for best French equities house for 2002. Unlike some of its rivals, it is a good all-rounder and has bought its skills to bear in all the different elements of the equities market over the past 12 months. BNP Paribas and Morgan Stanley’s involvement in the mega e1.7 billion convertible for France Telecom in November places them high in the league tables for this product, for example. However, neither of these institutions displayed a similar strength in straight equities over the year.
SG meanwhile has brought a good mix of issuers and types of deal, its superior distribution platform making it a natural choice for many French issuers. It lead-managed convertible deals for Pinault Printemps Redoute and Pernod Ricard and in straight equity has been involved in several sizeable block trades. These include raising e1.5 billion for Renault, e1 billion for Thomson Multimedia and a e1.2 billion placing for Vivendi Environnement with Deutsche Bank. The latter was slightly more successful than the deal Deutsche did for sister company Vivendi Universal a month later on which its partner in crime was Goldman Sachs. The attempted e3.2 billion deal was mispriced and flopped, losing both banks huge amounts of cash.
According to Autex data, SG is in the top three of traders in French stocks. Besides this, it has a cracking derivatives franchise in one of the most important markets in Europe for this product.
The prize for organizing the most significant French liaisons goes to Morgan Stanley this year. It has played the role of matchmaker in at least half of the top 10 M&A deals in the last year. Vivendi sought Morgan Stanley’s help to buy USA Networks for $10.7 billion in December as did Bcom3 when it set out to win the Publicis Group in March.
Morgan Stanley can also boast of a presence on the stickiest deals in France. It advised Gucci through its lengthy negotiations with LVMH and Pinault Printemps Redoute and Blue Circle when Lafarge was bidding for it, eventually achieving a higher price than was initially offered. It also worked with Crédit Agricole to provide a one-stop shop type service that involved it restructuring the state-owned bank and merging the regional branches into the central organization as well as running the IPO process.
GERMANY
Best bank: Deutsche Bank
Best debt house: Deutsche Bank
Best equities house: Deutsche Bank
Best M&A house: Goldman Sachs
There is a strong argument for not making an award in the German best bank category this year. Decades of mismanagement and poor cost control mean that all the domestic banks have been hit hard by falling asset quality and sluggish economic growth. Retail banking has long been a loss-maker in a market dominated by state-owned banks that, until recently at least, have not been too concerned about making profits.
In the end, the award goes to Deutsche Bank, largely because of its investment banking successes. It did not expand as aggressively as some of its peers during the years of internet-fuelled hysteria and has been able to build a sustainable, if not entirely profitable operation. It is the most international of the German banks, with a large proportion of its business now run out of offices in London and New York. This enables Deutsche to offer German corporates access to a team of internationally renowned bankers and a global investor base.
This year power will be transferred from CEO Rolf Breuer, who will become chairman, to heir in waiting Josef Ackermann. Breuer’s big idea of teaming up with Dresdner to produce synergies in the retail business failed when insurer Allianz snapped up Dresdner instead. It’s now likely that Dutch-born Ackermann will push Deutsche further into the realm of investment banking.
It’s already doing well in Germany where there’s plenty of international competition to fight off. Goldman Sachs managed to redeem itself slightly following the Vivendi Universal block trade with a e1 billion ($950 million) accelerated offering on behalf of Infineon just a day later. Infineon’s share price rose e1.15 in the immediate aftermarket. Goldman also finishes a respectable second place in convertibles. In the end, though, the crown goes to home-grown institution Deutsche Bank. As is the case in many markets this year, the victory has less to do with Deutsche’s prowess in the primary equity markets and everything to do with its highly acclaimed sales and research operations. Though Deutsche has completed the highest volume of convertibles – a market that was three times the size of straight equity this year – the majority were to effect asset sales off its own books. Secondary market trading is where the bank really shines. Deutsche is the undisputed leader in terms of market share on the Deutsche Börse, recording almost three times the volumes of its nearest rival Dresdner Kleinwort Wasserstein. It is leader of the pack when it comes to research, too, getting top marks from investors in all the major independent surveys.
European companies still tend to turn to their local banks when they need to raise debt – nowhere more so than in Germany. Deutsche Bank really has no competition for the prize of best debt house. It is the undisputed leader in both lending – where it has a market share of almost 30% – and bonds, be they for corporates, financials or public entities.
It would be easy to accuse Deutsche of relying heavily on its portfolio of equity holdings to generate debt market business but it would be an inaccurate assessment. True, the bank is close to DaimlerChrysler, in which it holds a substantial stake, and worked on several deals to refinance outstanding commercial paper for it this year but it has also raised money for RWE, Linde, Volkswagen and Bayer among others. It re-introduced to the markets Robert Bosch, which had not made an appearance since the 1980s and is also the only bookrunner to be involved in all of Deutsche Telekom’s bonds to date. Given the dubious success of the last deal, though, it may well wish to pass over that fact.
Over the past 12 months, Deutsche has extended loans to a range of different clients with various aims. It arranged e6 billion of acquisition financing for Bayer and e1 billion for INA and provided general purpose loans for Merck, ProSieben and Deutsche Telekom. It also arranged leveraged transactions for telecom company E Plus Mobilfunk to finance its UMTS network and for Kloekner Pentaplast, one of the most successful European LBOs of the past 12 months.
Goldman Sachs has maintained its traditional pre-eminence in Germany, where it has a 400-strong local office and again takes the prize of best M&A house in the country. Over the past 12 months it completed 18 deals worth $12 billion and of the 10 largest transactions has been involved in half.
Cross-border Goldman advised American Water Works on its takeover by RWE, as well as VAW Aluminium on its acquisition by Norsk Hydro. It also engineered the swap of Zurich Scudder asset management for Deutsche Bank’s European insurance business. This enabled Zurich Financial Services to increase its presence in the insurance business in Germany, Spain and Italy and Deutsche was able to expand its presence in asset management. In August it sold Brauerei Beck – which had 66 private owners – to Belgian company Interbrew for $1.56 billion making this the first takeover of a fully profitable German private brewery.
Goldman was also involved in several large leveraged buyouts this year in tandem with its private-equity arm, Goldman Sachs Capital Partners, where it played the triple role of equity investor, finance provider and M&A adviser. Such transactions included the LBO of Messer Griesheim and Cognis, the speciality chemicals arm of Henkel, which was bought jointly with Permira – formerly Schroder Ventures – for e2.6 billion. The Cognis transaction was announced just two days after the terrorist attacks in the US.
GREECE
Best bank: National Bank of Greece
Best debt house: Deutsche Bank
Best equities house: UBS Warburg
Best M&A house: JP Morgan
In October 2001, National Bank of Greece, the biggest in the country, announced plans to merge with Alpha Bank, Greece’s second-largest financial institution and the biggest private bank in the country. The deal would have created a banking superpower not just in Greece but in Europe as a whole. But the two banks couldn’t reach agreement on crucial issues such as the division of key management positions and the merger was later abandoned.
Even alone, though, National Bank of Greece is an institution to be reckoned with. Despite the state’s being a major direct and indirect shareholder, the bank has worked hard at cleaning up its balance sheet and becoming more streamlined. Under chairman Theodoros Karatzas, who was appointed in 1996, it has reduced its non-performing loans – although at 7% there’s still room for improvement – and is centralizing loan approval processes. According to analysts it has a market share of 26% in loans, 35% in deposits and 48% in mortgages and its business is still growing. It is a dominant force in wholesale banking and a key player in the loans market. In the future the bank will look to expand outside Greece.
It isn’t easy to award a best equities house in Greece this year. In contrast to last year, there’s been little primary business to speak of and the few transactions that have taken place have been spread thinly among institutions that have Greek operations. ABN Amro and Goldman Sachs lead managed a deal for Public Power, a power grid company, and BNP Paribas made a guest appearance on a couple of big convertibles for the Hellenic Republic. But the winner is UBS Warburg again for its insightful research, for which it has won numerous accolades, and its active participation in secondary markets.
Among international banks active in the Greek debt markets, Deutsche Bank stands out. It has been bookrunner on more bond deals than any other foreign or domestic institution and is an active participant in the loan market. It arranged e925 million of funding for Coca-Cola Hellenic Bottling Company under the terms of its e2 billion MTN programme throughout the year. It also raised e500 million in two tranches for EFG Hellas and arranged e225 million of lower tier 2 paper for Alpha Credit Group. One of the most novel transactions was Atlas, a e2 billion ABS for the Greek government, backed by payments from the EC to support development in Greece.
Rival Citigroup also deserves credit for its lending operations in Greece. Over the past 12 months it has arranged financing for a number of Greek companies such as Minoan Lines, Eletson Holding and Delta Holding.
JP Morgan has the honour of being best M&A house in Greece this year. In a quiet market, dominated by banking deals, it handled the largest domestic deal, advising the government on the divestment of 58% of ETBA Bank (Hellenic Industrial Development Bank) which was acquired by Piraeus Bank for e510 million. Piraeus advised itself on the deal.
IRELAND Best bank: Bank of Ireland
Best debt house: Deutsche Bank
Best equities house: Davy Stockbrokers
Best M&A house: Goldman Sachs
Banking in Ireland has long been dominated by Bank of Ireland and Allied Irish Banks (AIB), which between them have a market share of almost 80%. Although AIB’s international reputation has been damaged by the discovery of fraud in a US subsidiary, its domestic operations have not really been affected. Notwithstanding this, the best bank award this year goes to Bank of Ireland.
New CEO Mike Soden, who took over at the beginning of March, looks set to continue the tradition of tight cost control instilled into bank employees by retired CEO Maurice Keane. This has resulted in low bad debt charges of less than 20 basis points for the eighth consecutive year and a return on equity in the twenties for the ninth time.
Soden has committed his bank to selling off businesses that are not providing adequate returns on capital. He has also reaffirmed Bank of Ireland’s ambition to be more profitable abroad than in Ireland. In Ireland it has a market share of 38% of current accounts and 18% of mortgages and is growing fast in the UK where it is involved in mortgage lending through Bristol&West, which it acquired in 1997.
Bank of Ireland is also the leading bank for corporates in Ireland and this is the area in which it is growing fastest. Wholesale banking was responsible for 30% of group profits last year.
Bank of Ireland’s brokerage division, Davy Stockbrokers, takes the prize for this year’s best equities house. It’s research on Irish companies is almost unanimously considered to be the most insightful available and it consistently comes top in surveys of investors. Unlike most of the international houses, which cover Ireland from London, Davy has a team of analysts based in Dublin. It acts as broker to around 50% of companies listed on the Irish stock exchange and is a big if not the biggest participant [can we find out?] in the secondary market, offering its services to retail and institutional clients. Davy has been sole bookrunner on over half of the equity issues that took place in the past year, including the e104 million secondary offering for Independent News&Media and a e64 million transaction for Anglo Irish Bank.
Demonstrating its reach across the European markets, Deutsche Bank wins the award for best debt house in Ireland. Though there have been no very large bond issues out of Ireland, Deutsche has won the mandates for more issues than any other bank and has run a number of collateralized loan obligations for Portuguese banks in the Irish market.
Ireland is a tiny M&A market and it’s difficult to choose between the international banks and local houses such as Goodbody and Davy. In the end, one deal comprises much of the league table and determines the winner of the Irish award. That deal is the takeover by Valentia of telecom company Eírcom. The bank responsible is Goldman Sachs, which wins best M&A house for 2002. On this occasion it provided not only advice but equity via its private-equity arm and a financing solution. Besides this deal, Goldman advised Parthus Technologies on its acquisition by DSP Group for $419 million and Golden Pages when it was bought by VNU.
ITALY
Best bank: UniCredito Italiano
Best debt house: JPMorgan
Best equities house: Merrill Lynch
Best M&A house: Lazard
Since former McKinsey consultant Alessandro Profumo took the helm at UniCredito – the product of a 1998 merger between Credito Italiano, Rolo Bank and two regional Italian banks – no other bank has come close to it in the contest for best bank in Italy. It is testament to his achievement that, in late 2001, the bank was able to make serious approaches to German institution Commerzbank. The irony of an Italian institution — for long the worst managed and least efficient in Europe – moving to acquire a German firm was not lost on observers. According to insiders, Profumo felt that there must be some value in Commerzbank but investors in Unicredito disagreed and the stock price plummeted. In many ways this was the ultimate accolade to Profumo’s achievements.
Analysts credit him with turning Unicredito into a world-class bank. It has expanded its retail banking presence to take a market share of between 10% and 12% across all products, operating under seven different brand names in Italy
It does not have a huge corporate banking business but where it does have a real competitive advantage is in providing derivative-based solutions for Italian corporates. This year, for example, it devised a structure that enabled national airline Alitalia to neutralize the effect of fuel cost rises on its business by using derivatives to hedge against price increases. Analysts say that in this area UniCredito can give the international banks a run for their money and, unlike them, it has strong relationships with domestic companies.
UniCredito offers investment banking services through UniCredit Banca Mobiliare, which was established in 2000, and it owns Pioneer Investments, Italy’s top asset management company.
Banca Mobiliare does not yet have a strong presence in the Italian equity market, where JPMorgan again comes out on top. Italy is one of the few countries in Europe where JPMorgan continues to profit from an expansive network of contacts among corporates and an ability to provide an integrated approach to financing. In 2002, it has enabled some of the most important Italian companies – Fiat, Telecom Italia and Sogerim – to borrow large sums in the bond markets. It has also secured several significant loans for corporates. In July, it raised e5.5 billion ($5.2 billion) for mobile phone company Wind which needed to refinance facilities signed in 2000 to expand its UMTS network. Despite widespread aversion among banks to yet more telecom debt, the issue was oversubscribed and JPMorgan was able to price at a discount to peers. Four months later it completed a e5 billion revolving credit facility for parent company Enel and was recently sole bookrunner on a e795 syndicated loan for the leveraged buy-out of food company Galbani.
The bank is very active in financial institutions and completed the largest ever tier 3 transaction this year for UniCredito at e600 million. It has been responsible for some significant transactions on behalf of the Republic of Italy and this year completed its first 15-year maturity borrowing.
Equity markets are Merrill Lynch’s forte in Italy. This year it has completed transactions in the equity and equity-linked markets for a range of Italian corporates. Among them are football club Juventus, which raised e143 million via an IPO, and De Longhi, a household appliance firm that floated a stake for e128 million. In December Merrill was joint bookrunner on a block trade for ST Microelectronics that raised e2.5 billion and it played a key role in the Fiat rights issue and exchangeable into General Motors for the same amount. In convertibles, Merrill was joint book runner on the e2.4 billion convertible rights issue for Olivetti and completed an exchangeable for old ally Mediobanca into UniCredito shares.
Salomon Smith Barney also had several important successes in Italy this year including the e1.7 billion IPO of SNAM Reta Gas and the much smaller flotation of Lottomatica, one of the few IPOs of 2001 to trade up in the after market
The spot of top M&A adviser in Italy has been fiercely contested in recent years. For long, Mediobanca ruled the roost but last year JPMorgan rose to the top of the league tables. This year has been a close contest between Mediobanca, Merrill Lynch and Lazard but finally it is the latter’s turn to take a bow. Over the past year, bankers at Lazard have advised many of Italy’s largest companies on strategically important acquisitions that have altered the country’s corporate landscape.
It has worked with Enel on several occasions, most recently on the purchase of Camuzzi Gazometri, and advised Pirelli and Benetton on their acquisition of Bell, which led in turn to them winning control of Telecom Italia. In July, it put its expertise in cross-border transactions to work and provided advice to a consortium led by Spanish utility company Endesa that bought Elettrogen from Enel, it also helped state-owned Electricité de France win a controlling stake in Montedison, along with Fiat, via financing vehicle Italenergia.
LUXEMBOURG
Best bank: Banque Générale du Luxembourg
Best debt house: Deutsche Bank
Best equities house: Credit Suisse
Banque Générale du Luxembourg is one of the oldest banks in Luxembourg, having been founded in 1919. It’s also the best, in our view, in a market dominated by foreign and niche players. Since 2000, Banque Générale has been part of the Fortis group and now offers a full range of commercial and corporate banking services. Since the second half of 2001 the bank has been implementing a tough cost-cutting programme, in common with its peers in the rest of Europe. At the same time it has been upgrading its 40 branches nationwide. Given the limited corporate audience in Luxembourg, it has opened competence centres in the neighbouring areas of Alsace in France and the Rhineland in Germany to service the increasing numbers of companies doing business cross-border.
Banque Générale has a 40% market share of corporate business domestically, according to its own estimates, and sits as a shareholder on the board of large firms such as Arcelor, Société Européenne de Satellites and Luxair, which also do some business directly with Fortis.
CSFB wins best equities house in Luxembourg again this year for its strong commitment to this tiny territory. Rival Swiss bank UBS Warburg has completed several of the few deals that have taken place this year – for Arcelor and Thiel Logistik, a software company. However, CSFB is the dominant bank on the secondary market, trading four times as much volume as any other institution according to Autex figures.
Deutsche Bank has completed several asset-backed deals in what has otherwise been a fairly deserted marketplace and wins the award for best debt house this year. Among them was a CDO for Pacific Investment Management secured on a portfolio of emerging-market loans and bonds. It has also arranged loans for Luxembourg companies such as Société Européenne des Satellites.
NETHERLANDS Best bank: ABN Amro
Best debt house: ABN Amro
Best equities house: ABN Amro
Best M&A house: Citigroup
Although ABN Amro is still struggling to decide what it wants to be internationally, at least domestically it is still the dominant bank. This year, like many other banks, it has pulled back from some of its overseas businesses, principally its US domestic equities and M&A operations.
Since 2000 the bank had been reorganizing its business units, a process that was completed last year with the formation of three segments: consumer and commercial clients, wholesale clients, and private banking and asset management. Chairman Rijkman Groenink says the bank will now give more attention to asset-gathering activities and less to wholesale banking.
In retail banking, ABN has a 24% market share in deposits and 19% in customer lending. This year it has been rolling out its telephone and e-banking services and claims to have 600,000 clients using its online banking facilities. Branch closures -part of a cost cutting drive – have not led to customer attrition because, ABN claims, its internet and telephone banking are so user-friendly.
ABN has some good corporate banking franchises. For example, it’s transaction services division, which includes cash management, clearing and execution and custody business is performing strongly and it is the undisputed leader in the fixed-income markets in the Netherlands.
ABN has an impressive collection of deals to its name over the past year and its list of clients features the top Dutch names. When Philips wanted to make its first call on the bond markets since 1996, it turned to ABN to help it do so. Unilever mandated it for a e1 billion ($940 million) deal, as did Shell [Shell? Or Royal Dutch?] and Akzo Nobel, both of which had been absent from fixed-income investors’ radar screens since the 1990s. The success of TNT Post Groep’s inaugural issue is a feather in ABN’s cap. Despite the fact that the price was tightened during bookbuilding, the order book was four times oversubscribed. Achmea Hypotheekbank was another newcomer that ABN introduced to bond investors this year, one of a number of deals completed for financial borrowers. ABN has also been an active participant in the markets on its own behalf. This year it completed two such transactions. Smile 2001 involved securitizing 30,000 loans made by the bank to SMEs to the tune of e5 billion. Amstel 2001 at e12.5 billion, was the largest collateralized loan obligation globally, a sure sign that the market is comfortable with ABN as a user of securitization.
The choice of ABN Amro as best equities house in the Netherlands is a no-brainer. It is clearly still profiting from the marriage with Rothschild in equity capital markets and has been an integral player on virtually every important equity deal over the past year. The highlight of the year was undoubtedly the e5 billion capital raising exercise for national telecom operator KPN in December, which rescued it from the brink of bankruptcy. ABN was responsible for devising an innovative structure for the issue that enabled KPN to get guaranteed funding and expand its shareholder base – unlike with a traditional rights issue. Investors placed orders with a price limit, rather than having to accept a fixed price. This was the largest equity offering to be done in the Netherlands and one of the biggest capital increases in Europe.
ABN ran a e2.6 billion accelerated bookbuild for Ahold in September to fund its acquisition of Alliant Foodservice and Bruno’s supermarkets and was a joint bookrunner on the Euronext flotation in July.
According to Autex, ABN is number-one dealer in the Netherlands. It has a team of 11 local equity analysts whose research regularly receives plaudits in global investor surveys
Salomon Smith Barney leveraged its strength in M&A in the utilities sector in the Netherlands to win the mandate to advise Royal Dutch/Shell on its acquisition of Enterprise Oil of the UK. This e5.7 billion transaction enlivened what was a relatively dull year in the Dutch markets and helps win Citigroup the accolade of best M&A house in the Netherlands. It also advised the government on the sale of 7.3% of TNT Post Groep and helped Achmea, the financial services company that is part of Eureko, bid for the remaining 10% of Foreign&Colonial that it didn’t already own and the rest of Interamerican Hellenic Life Insurance. In all, Citigroup has a share of almost 25% of the M&A market in the Netherlands.
PORTUGAL
Best bank: Banco Totta e Açores
Best debt house: BCP Investimento
Best equities house: UBS Warburg
Best M&A house: Finantia
None of Portugal’s banks has had a particularly easy time of it in the past 12 months. Banco Comercial Português has long been regarded as the most impressive privately owned bank. However, this year its record has been blighted by unexpected management departures as well as analyst concerns that chairman Jorge Jardim Gonçalves has overstretched himself with a string of acquisitions in Greece, Poland and Spain as well as at home.
One institution, Totta&Açores, shines through all of the gloom. The group consists of Totta, Crédito Predial Português and the commercial and investment banking businesses of Banco Santander in Portugal. Though it’s only small – net assets stand at e27.4 billion ($26 billion) – the bank put in a strong performance in retail, wholesale and investment banking this year and is the most innovative and fast moving among Portuguese institutions.
Some of its initiatives over the past 12 months have seemed a little unusual. After the success of its strategy of offering free furniture with mortgages it began to offer free cars. But one of its strengths is that, in spite of these extreme-sounding promotions, CEO António Horta Osório keeps a close eye on costs – cost income ratio for 2001 was 49%. Osório has also overseen a reining back of non-performing loans from 2.4% in 2000 to 2% in 2001.
In retail, Totta increased loans by 17% to e19.2 billion and customer funds by 19% to e21.7 billion -in large part because of a 117% growth in structured products and securities and a 40.7% increase in distributed investment funds. This year Totta launched Net@banco, its online bank.
Totta’s investment bank, Santander Negócios Portugal is strong in the leasing business, having worked with the Metropolitano de Lisboa on several transactions. It also participated in the privatization of Brisa and the capital increase for Portugal Telecom Multimédia. It has a small custody business and claims to be in third place with a market share of 10% on the Lisbon and Oporto stock exchange.
Best debt house in Portugal goes to another local institution, BCP Investimento for its ability to meet corporates’ financing needs, particularly in the SME sector. It has a strong position in both domestic bond issuance and structured products, which make up a large part of the Portuguese market. It arranged commercial paper programmes for, among others, Portugal Telecom and is an MTN dealer for the most significant issuers in the country such as cement company Cimpor and Electricite de Portugal. In structured finance it was joint lead manager with two international banks on Magellan Mortgages, the first securitization of mortgage loans in Portugal. Project finance is also one of BCP’s strengths and it is currently working on financing solutions for the building of football stadiums for the Euro 2004 tournament which will be held in Portugal
Investors in domestic equities value advice from UBS Warburg on where to put their money. The strength of its equity research – it has five analysts who focus on Portugal, two based in the country and three in London and Madrid – translates into a high volume of trades on the local stock exchange.
Crosshead
Companies whose shares are trading on that exchange regularly turn to Banca Finantia for M&A advice. It has an impressive client list of domestic and international firms and in the past has worked with Spanish, French, UK, German and Dutch companies on acquisitions in Portugal. As well as its focus on the Portuguese markets, where it has offices in both Lisbon and Oporto, Finantia has a strong Latin American franchise. It has subsidiaries in São Paolo, New York, London and Madrid.
In its home market, Finantia has worked on such transactions as the e753 million offer by state-owned pulp and paper company Portucel for its rival Soporcel, which closed in May, and the sale of one food company,Baral, by another, Quijo Saloio, for an undisclosed sum in September. Finantia also helped bolster weak M&A volumes in Portugal this year with an acquisition of its own. It bought Inberbolsa, a Spanish brokerage house, in July and not surprisingly, took its own advice on the purchase.
SPAIN
Best bank: Banco Popular
Best debt house: JPMorgan
Best equities house: Santander Central Hispano
Best M&A house: Merrill Lynch
The two traditional banking leaders in Spain – BBVA and SCH – haven’t had much favourable press coverage lately. Both have experienced rapid management turnover, particularly BBVA, where the departures were linked to secret offshore accounts that are being scrutinized by the Bank of Spain. Both have also been dogged by concerns about the future of their Latin American subsidiaries and still absorbed with the integration of large acquisitions at the end of the 1990s.
Banco Popular meanwhile has remained unhindered by such concerns, leaving it free to put in a strong performance with customers and investors. It has made significant gains in market share, with a growth rate in lending close to 20%, but most impressively has done so without damaging its profitability levels. Popular maintains a cost/income ratio of 38% – one of the lowest of any European bank.
Its record in cross-selling is impressive by anyone’s standards. Popular claims to sell an average of almost seven products to each customer, the result, it says, of a powerful customer relations management system and the fact that it plays the role of financial adviser to its clients rather than simply seeing banking products as commodities. Overall, it has a retail market share among the privately owned banks of 9%.
In wholesale banking, Banco Popular maintains a focus on small and medium-size organizations and has relationships with 70% of the market at this level. Around 80% of its loan book is given over to SMEs, which are more receptive to cross-selling than the largest corporates – for whose business Popular is competing with the big Spanish banks.
Santander Central Hispano may not be enjoying good times in the rest of the bank but its investment banking dominates the equities market. Over the past 12 months, SCH has been involved in almost every significant deal in the country and there have been some sizeable transactions. Most feted perhaps was the IPO of Inditex, better known as the brains behind the chain of Zara clothing stores. It raised e2 billion ($1.9 billion) in one of the most successful flotations in Europe last year and SCH’s superior institutional and retail distribution capabilities were crucial to the success of the deal. So far this year, there’s been little activity in the Spanish equity markets but SCH consistently ranks number one or two in secondary trading according to Autex and the quality of its research has been recognized in several independent surveys.
JPMorgan is the bank that Spanish financial institutions turn to for their own financing needs. This year it has been mandated on deals for Caixa Sabadell, Santander Central Hispano, BBVA and Caixa de Catalunya, among others. It also played a key role in Telefónica’s e2 billion bond deal in October.
It’s a close contest for best M&A house in Spain this year with JPMorgan largely retaining its long standing dominance here too. However the award goes to Merrill Lynch, which has been involved in several ground-breaking deals in Spain. It advised on the innovative three-way steel company merger between Usinor of France, Aceralia of Spain and Luxembourg-based Arbed to form a e4.4 billion company in February. Merrill also aided Enel in its successful e2.1 bid for Nueva Viesgo in December. The deal that got the most attention internationally, however, was the sale of HidroCantábrico, which turned out to be an extremely hot asset in the utilities world. In order to capitalize on the huge interest in the company, Merrill introduced an auction process, fielding a total of seven non-solicited offers for Hidrocantábrico before a consortium headed by Electricidade de Portugal placed the winning bid at e2.9 billion.
SWITZERLAND Best bank: UBS
Best debt house: CSFB
Best equities house: UBS
Best M&A house: CSFB
It hasn’t been a good year to be a Swiss bank. Neither of the two big ones – Credit Suisse and UBS – has enjoyed much good publicity lately. Directors of both were implicated in the collapse of national airline Swissair, which crashed down to earth last year amid revelations of shoddy corporate governance. Credit Suisse’s woes went much deeper, however. It seems to have become embroiled in every scandal around. However, under the guidance of John Mack, who became chief executive in July, it has at least been taking steps to reduce costs.
UBS, however, despite the occasional blip, continues to go from strength to strength. It remains the largest Swiss bank, with a domestic retail market share of 32% – versus 20% at Credit Suisse – and is the biggest asset manager globally.
After a tricky few years, when the asset management business seemed to be on the wane, UBS’s fortunes changed and for the first time since the merger of UBS and SBC, it experienced inflows to the business. That’s just as well, since the reorganization at the end of last year, placing Peter Wuffli, former head of UBS asset management, at the helm in place of Luqman Arnold, provides a strong hint as to UBS’s growth priorities.
UBS has SFr182 billion ($116 billion) of outstanding loans – around 25% of the domestic lending market – and is building a presence in the debt markets.
In European equity markets, UBS can boast of a fantastic franchise. According to a number of independent surveys it is the top brokerage firm in the country and is the undisputed leader in research, with a sizeable team of Zurich-based analysts. It is a clear leader in the primary markets. Those qualities earn it the title of best equities house in Switzerland this year.
Among its achievements this year is the whole-company flotation of Converium, the reinsurance business of Zurich Financial Services. This deal was done in the face of much market scepticism about the feasibility of bringing a reinsurer to market so soon after 11 September. It holds the triple honour of being the largest reinsurance IPO, the largest Swiss non-privatization IPO and the largest 100% corporate IPO ever done. UBS was also responsible for a e363 million ($341 million) convertible market index-linked equity securities (MILES) issue for Zurich. This was a structure that it had already used for Allianz in an exchangeable form in 2000 but not as a convertible. The deal allowed Zurich to escape the threat of a ratings downgrade and the novel structure means that if its stock outperforms the SMI it will have to issue fewer shares when the bonds convert.
In the fixed-income market CSFB dominates in almost every sector. It was bookrunner on four issues for frequent issuer Nestlé, including its largest straight debt financing to date in dollars and a e400 million deal that was priced inside the Germany government curve. Novartis, which is also AAA rated, managed to achieve extremely tight pricing for its first euro-denominated issue, borrowing e900 million at Libor minus 8 basis points, versus market expectations of Libor plus 10bp.
CSFB brought the French post office back to the Swiss markets this year after a nine-year absence with a SFr800 million bond and handled the inaugural transaction from Bundesimmobilien Gesellschaft. One of the more unusual transactions this year was a privately placed ABS for the Fédération Internationale de Football Association (FIFA), on which CSFB was sole lead bank. The bonds were backed by marketing revenues from events such as the 2002 World Cup in South Korea and Japan and the upcoming 2006 tournament in Germany.
There is little contest between CSFB and UBS Warburg for best M&A house – CSFB leads the field by some way both in Switzerland and on cross-border transactions. Over the past 12 months it has advised on a range of transactions for both large and small-cap companies across various sectors. In FIG it advised insurance company Winterthur on the acquisition of Prudential’s UK personal general insurance business for e571 million and worked for US insurer Nationwide Mutual Insurance in the sale of its subsidiary Neckura to Zurich Financial Services. CSFB also advised national rail company Schweizerische Bundesbahn on the sale of 20% of electric services firm Energie Finanzierungs to utilities company Elekrizitätsgesellschaft Laufenburg and is currently working with the Swiss government on the forthcoming deregulation of the electricity market.
UK Best bank: Royal Bank of Scotland
Best debt house: Barclays Capital
Best equities house: Merrill Lynch
Best M&A house: Merrill Lynch
Two years on from its takeover of NatWest, Royal Bank of Scotland is more comfortably than ever the best bank in the UK. Executives at the bank say they no longer even think about the acquisition since the integration of NatWest is now all but complete, with only some IT systems and back-office functions still to be united next year.
RBOS is the institution that over 80% of UK corporates turn to for day-to-day banking needs. There are plenty of reasons for them to do so. RBOS is the number one bank at acquisition financing in Europe and ranks highly in syndication, corporate banking, sterling foreign exchange and interest rate derivatives as well as being the biggest non-US institution in the dollar private placement market.
Unlike many other institutions, RBOS took the decision to bring together all of its product teams into one corporate banking and financial markets division under the auspices of John Cameron. This includes the bank’s treasury fixed-income and derivatives operations as well as its structured finance operations, asset management and private equity. All employees in this division are managed in the same way, thereby avoiding the tussles that can arise between those on the corporate side and those in more highly paid investment banking. It also means that customers only deal with one integrated division when they approach the bank.
This all-in-one approach has paid dividends on several recent transactions. For example, National Car Parks was a deal on which RBOS worked with private-equity group Cinven and involved teams from the bank’s property finance, leveraged finance, capital markets and equity finance divisions. It also provided e737 million ($693 million) of debt financing to Cinven.
RBOS has taken advantage of the fact that many of its peers are laying off staff to build up its capital markets capabilities. It has strengthened its franchise outside the UK and has recently completed transactions for such European corporates as Bertelsmann, Vivendi, Endesa and Holcim.
At Barclays Capital, Bob Diamond’s bet on the bank’s success as a stand-alone fixed-income franchise has borne most fruit in the UK, where the bank wins the award for best debt house. It arranges more loans for corporates than any other bank. This year its clients have included Anglian Water Services, for which it arranged a complex transaction comprising a £1 billion bridge facility and £500 million of working capital. Barclays also arranged a hostile bid defence facility of £417 million for Wolverhampton&Dudley Breweries. Its expertise goes far beyond lending, though. In the sterling market – still an important segment of the fixed-income universe – it emerges as the clear winner, having issued sterling tranches for such companies as BAA, Innogy, Prudential and J Sainsbury. Of the FTSE 100 companies, Barclays can boast close relationships with over 80%.
Other key deals last year were the first euro-denominated issues for Rio Tinto at e750 million and National Grid for e1.25 billion. UK banks also rely on Barclays to manage their transactions. Some of the institutions it has launched deals for this year include Northern Rock, CGNU and Nationwide Building Society.
There’s only a hair’s breadth between the winner and the second-placed bank for best equities house in the UK. Merrill Lynch takes the award but Swiss rival UBS Warburg wasn’t far behind. Both have an excellent primary market franchise in the UK, take an extremely active role in secondary trading and have highly ranked research teams. Ultimately, Merrill comes out on top on the basis of the quality and variety of issues it has brought to market this year.
Last May it coordinated a life-saving cash infusion of e9.7 billion for British Telecom. This was the largest-ever equity raising exercise in the UK and one of the biggest rights offerings. Merrill’s expertise in this area was tapped again earlier this year for the ICI rights issue, completed with UBS and Goldman Sachs. Merrill also floated mutual society Friends Provident, the biggest of 2001 and was responsible for the market debut of cleaning products company PHS. Not forgetting Merrill’s old trademark, the accelerated global tender (AGT), it raised e3.4 billion for Royal Bank of Scotland, again with UBS, to fund the acquisition of Mellon Bank’s US operations. This transaction was especially challenging because news of RBOS’s purchase was leaked before the trade took place. In convertibles, a small market in the UK last year. Merrill did a e731 million deal for WPP group with a conversion price of 45%, the highest ever achieved in the UK.
The strength of Merrill Lynch’s brokerage ties has also helped it to build a formidable presence in the UK M&A market. Among the most significant of these relationships is with British Telecom. Merrill has advised BT, through an extremely testing year for the company, on the $11 billion demerger of mobile division mmO2 as well as the sale of stakes in Japan Telecom, J-Phone and Airtel for a total of $7 billion in June. That same month, with BT desperately seeking a buyer for Yell, its telephone directories business, Merrill lined up private-equity firms Apax Partners and Hicks Muse Tate&Furst to complete one of the largest private-equity buy-outs in Europe. In September, it advised mortgage bank Halifax on its e17.2 billion bid for Bank of Scotland and currently it is working with Carnival on the pending hostile acquisition of P&O Princess Cruises.
Merrill has also been active on smaller deals, such as Friends Provident’s purchase of Royal&Sun Alliance Investments for e387 million, the MBO of Galen Holdings and Edison Misson Energy’s e500 million bid for American Electric Power. Salomon Smith Barney has also performed strongly this year, particularly in the utilities sector. It advised Eastern Electricity on its sale to Electricité de France for e2.3 billion and Shell on its e5.7 billion bid for Enterprise Oil. Both of these transactions are still pending.
