Best bank – HSBC
Best equity house – Goldman Sachs
Best debt house – HSBC
Best M&A house – Morgan Stanley
HSBC is Hong Kong’s top bank. It dominates from consumer banking to commercial banking through to investment banking. And over the past year it has continued to grow in many of these areas.
HSBC’s commercial banking business also grew, with pre-tax profits up 18%. Investment funds sales increased by more than 200% to HK$4 billion and commercial insurance sales climbed 100% to HK$9 billion. HSBC’s payments and cash management services in the territory continue to dominate.
Income from its credit card business rose 15% to HK$3.1 billion (US$397 million). Its credit card charge-off at the end of 2002 was just 10.2%, which is 3% lower than the industry average. It is the leading retirements fund provider, with US$33 billion under management. It is also the largest Mandatory Provident Funds provider, with almost a million accounts.
It was a quiet year in Hong Kong for listings but Goldman Sachs takes the award for best equity house because of its prominence in the few deals of note. It was involved in the two most important, which made it the number one bookrunner in the market by a wide margin. It raised 36% more capital than second-placed UBS. The most attention-grabbing deal of the year was the Bank of China (Hong Kong) US$2.7 billion IPO. Alongside UBS, Goldman successfully executed a landmark transaction in difficult market conditions. Despite the deal’s size, institutional investors wanted five times as much as was on offer and the retail side was 24 times oversubscribed. The deal was the all-important first step for the Chinese to prove that they were serious about reforming their financial sector. The transaction was also the largest ever retail offering in Hong Kong and the largest Hong Kong-only listed IPO ever.
Goldman followed up this success with the listing of Standard Chartered for US$377 million. October was a difficult time to take anything to investors but Standard Chartered was delighted with the outcome. It sent out a message to its customers and clients that it is indeed committed to Asia. It also substantially broadened the bank’s institutional shareholder base in Asia.
HSBC outshone competitors in the Hong Kong debt market and takes the award for best debt house. It is number one in Hong Kong dollar lead-managed bond deals; number one lead manager for Hong Kong corporates and quasi-government entities; number one lead manager for foreign issuers in the Hong Kong dollar market; and number one mandated arranger in Hong Kong dollar loan deals. And so the list goes on. As well as being a money-making machine in these markets, HSBC is developing the retail bond market. In March it completed the longest-tenor Hong Kong dollar tranche and the first US dollar corporate retail bond issue for the Airport Authority. The size of the deal was HK$1.2 billion and the tenor was stretched to seven years.
Morgan Stanley headed the league table for announced and completed M&A transactions in Hong Kong from June 2002 to May 2003. It completed US$3.6 billion-worth of deals, well ahead of Goldman Sachs, which closed deals worth US$2.3 billion. But the bank wins the award for the complexity of some of the deals completed rather than just topping the tables. The US$2.1 billion restructuring of the New World Group is a prime example. This was the territory’s largest-ever blue chip restructuring and involved coordinating the strategies of three publicly listed companies: New World Development, New World Infrastructure, and Pacific Ports. Three significant goals were achieved: NWD was left with more balance between its assets and liabilities; NWI’s debt was significantly reduced, allowing it to focus on its core strengths as a China-facing media company; and PP achieved greater scale. Other deals Morgan Stanley was involved in include advising Sung Hung Kai Properties on its US$445 million offer for SmarTone and China Resources Power on the acquisition of a 33% share in Shjiao C for US$300 million.
