Best bank – Deutsche Bank
Best debt house – Deutsche Bank
Best equities house – UBS
Best M&A house – JPMorgan
Best at risk management and treasury – UBS
Best at cash management – Deutsche Bank
Best at custody – JPMorgan
Deutsche Bank wins the best bank in western Europe award this year for its commitment to European corporates and institutions and its expertise across the board in investment and commercial banking.
Since Josef Ackermann took the helm last year, the bank has been steadily improving, shrinking costs while still managing to grow the businesses in which it wants to work. Earlier this year, it sold its securities services business, its passive asset management funds and its late-stage private-equity portfolio as part of its decision to refocus. It completed a share buyback programme in early 2003 and, through selling non- core assets, increased its tier 1 capital ratio to 9.6%.
Deutsche has a bond business that is the envy of its rivals and uses its balance sheet judiciously – its decision not to participate in Volkswagen’s latest credit facility was greeted with grudging admiration by its rivals.
Deutsche is also making steady progress in both equities and M&A. Its derivatives business is acknowledged to be of world-class quality and this year the bank has grown significantly in credit derivatives, interest rate derivatives and commodities.
DWS, the bank’s asset management firm, is highly regarded throughout Europe and was awarded the accolade of best mutual fund company by Standard & Poor’s this year. Last but not least is Deutsche Bank’s huge cash management business, which makes it the dominant player in Europe, despite the best efforts of its rivals to win market share.
All of this combines to produce an impressive package of banking services. In our view, and despite the difficulties Deutsche Bank must continue to overcome – it battles with cost control, the bugbear of all German banks – this means that it is still peerless among European banks.
Deutsche Bank’s debt business is particularly impressive. It raises by far the largest amount of money for western European borrowers, be they corporates banks or high-quality issuers. What’s more, it does so in a wider range of currencies than any other house. It has a good track record with debut issuers, having brought BHP Billiton, Deutsche Post and Bayer to market this year, and strives to innovate for frequent issuers. This year it led the way in opening up the 30-year market – a personal pilgrimage for head of debt capital markets Hope Pascucci.
Other achievements over the past 12 months include the funding of the e9.4 billion needed by the French government to take up its portion of the France Telecom rights issue and the raising of more than £1 billion ($1.6 billion) of project finance for Metronet, which funds the London Underground. The bank meeting for the Metronet deal took place the day after a train derailed at a central London tube station.
Deutsche leads the way in Europe’s fledgling high-yield business – a responsibility it clearly takes seriously. According to David Fass, the bank’s head of high yield, Deutsche turns down more deals than it brings to market because it doesn’t want to damage its reputation with investors.
Deutsche also dominates the loan market in Europe, completing landmark transactions this year such as the e2.65 billion facility for Madison Dearborn to finance the buyout of Jefferson Smurfit, which was heavily oversubscribed. It is also providing e2.27 billion of acquisition financing to Xstrata to fund its purchase of MIM Holdings in Australia.
In the securitization business Deutsche continues to innovate, with transactions backed by novel asset classes. In late May, for example, it launched the Taneo deal on behalf of the Greek government. These bonds are backed by private-equity investments but guaranteed by Greece.
The best equities house in western Europe award once again goes to UBS, whose impressive franchise across primary and secondary markets, research and distribution places it head and shoulders above the competition. Its closest competitor, Goldman Sachs, has had an excellent year but doesn’t share UBS’s excellence in research and trading. UBS sweeps the board in the Thomson Extel survey as well as the Institutional Investor All-Europe team.
Morgan Stanley could have been a contender but has suffered a couple of embarrassing slip-ups on block trades this year. As Euromoney reported in May, it had trouble with a sale for Repsol and one for Reckitt Benckiser. As for Merrill Lynch, the former European equities powerhouse seems to have taken its eye off the ball and its capital markets business has dwindled this year.
Last year UBS merged its equity risk group into equity capital markets to take advantage of the trend towards more innovative forms of issuance.
It has taken a leading role in many of the rights issues by which European companies have sought to repair their balance sheets, including Allianz’s e4.4 billion offering and Zurich Financial Services’ rights issue which was equally crucial and transformational for the company.
JPMorgan takes the award for best M&A house in western Europe this year for its strong presence across the whole region. As the individual country awards below demonstrate, the bank is just as skilled at deal-making in the larger markets, such as Italy, as in smaller ones such as Austria and Greece. The league tables show that it has advised more western European bidders than any of its rivals. It is particularly adept at advising European companies on the acquisition of non-European targets, with a 15% market share in this type of business. Although Goldman Sachs may be present in a greater number of deals with a European element overall, it tends to be on the non-European side, advising Household on its acquisition by HSBC and Chef America on the Nestlé transaction, for example.
JPMorgan’s strength lies in its commitment to maintaining local offices in the major European cities and staffing them, where possible, with nationals of those countries. This local market knowledge enables the bank to tackle the most complex and sizeable deals. It advised on the biggest transactions over the past 12 months – Telecom Italia’s merger into Olivetti, Gas Natural’s hostile bid for Iberdrola, the merger between Lattice and National Grid, and the acquisition of Crédit Lyonnais by Crédit Agricole.
In Germany, JPMorgan worked on a rare hostile takeover, of Barilla by Kamps, and in the UK it advised Celltech on its unsolicited offer for Oxford GlycoSciences, which had already agreed a merger with a third party. And in France, JPMorgan worked with Vivendi on the acquisition of Cegetel, enabling a financially stretched company to acquire a strategically important stake. JPMorgan was also involved in the largest restructuring of the past year, acting as recapitalization adviser to NTL.
Awarding the title of best risk management and treasury house is never an easy task. This award is an attempt to determine which house is the most attuned to the problems threatening the profitability of businesses and the most skilled at helping them deal with those threats. So while a leading position in derivatives flow businesses is probably necessary, it’s not enough on its own. Neither is a team of rocket-scientist prop traders. What we are looking for is a holistic approach to risk management along with a strong position in treasury products such as foreign exchange and commercial paper.
On this basis, this award goes to UBS for its impressive firm-wide attitude to risk and its ability to find innovative solutions for clients, always mindful of the need for transparency and accountability on its part. Equity capital markets bankers now see managing risk as their primary concern, and last year UBS merged its equity risk group into its equity capital markets division to reflect this priority, as discussed above.
UBS achieved impressive results in this year’s Euromoney risk management poll, coming in first, up from third the previous year. Deutsche Bank, its closest rival in Europe, was in fifth place. UBS scored particularly well in the tailored and structured products category, gaining top rankings for pricing, ideas and service. According to the 2003 Thomson Extel survey it is also strongly placed in flow products, coming second behind Merrill Lynch in research and second behind Deutsche for flow products sales. Among achievements this year was a derivatives structure designed to overcome valuation disagreements between Carlton and Granada, two UK companies that merged last year.
Behind the scenes, UBS is working with a variety of corporates and financial institutions on such issues as liability management – facilitated by the pooling of equity and credit derivatives, tools to enable insurers to invest in traditionally illiquid assets more easily, and to allow executives to derive value from the stock options they hold and more innovative and cost effective forms of hedging.
Deutsche Bank takes the award for best cash management bank in western Europe this year. Its mantra is a simple one – to drive volumes and efficiency up, while driving costs for customers down. The policy of Deutsche’s board is to invest constantly and heavily in improving its infrastructure as this, it believes, is the way to win customers that come to the bank either directly or via financial institutions. The latter group of clients is one that is often neglected by other cash management providers.
The bank is the largest euro clearer in terms of volumes and participates in all the major clearing systems. According to Greenwich Associates’ 2003 report on cash management for corporates, Deutsche wins in most categories, including overall performance, market penetration and customer service. Euromoney’s cash management poll, published in November, provides further evidence of the bank’s expertise. Deutsche comes top based on responses from western European clients both for volume of business and client satisfaction.
It counts many of the largest and most prestigious corporates among its customers, such as AOL Time Warner and Hercules Europe, as well as some of the largest financial institutions in Europe.
JPMorgan is the leading global custodian in Europe in terms of both volumes handled and its geographical presence. Its strategy is to grow the business organically and last year it expanded particularly aggressively in the key European centres of Dublin, Luxembourg, Frankfurt and London. In Germany, its business doubled compared with the previous 12 months. Across Europe, JPMorgan investor services now employs 3,000 people – a third of whom are based in local offices – and services a client base in of 340 institutions.
According to Global Investor’s annual custody survey, JPMorgan is the number one custodian based on responses from European clients. Among satisfied customers are Axa Investment Managers, for which the bank is information and paying agent in Belgium and the Netherlands and also provides custody, fund accounting, fiduciary services, and transfer agency and mandate monitoring across Europe. Isis Asset Management and TKP Pensioen of the Netherlands use JPMorgan’s global custody services and Gothaer Versicherungen in Germany is a customer of FundsHub, JPMorgan’s fund aggregation and trading subsidiary.
