Asia

Best bank
Citigroup

Best equity house

Goldman Sachs

Best debt house
Citigroup

Best M&A house

Morgan Stanley

Best at risk management and treasury
HSBC

Best at cash management
Citigroup

Best at custody
Citigroup

For the fourth year running Citigroup has taken the award for Asia’s best bank. There is no sign that it is losing steam. In all markets and all products it is still moving ahead and it has the region’s densest branch network. It provides more services in more markets for more customers than any other bank. It had a solid year in debt, raising $1 billion more for corporates than second-placed HSBC. It competes easily with the global houses in G3 currencies and, unlike many of the larger players, competes on an even footing with domestic banks in local-currency markets.

In equities it’s a similar story. Citigroup was involved in 21 deals worth a total of $2.8 billion in 13 countries, pressing hard on the heels of Goldman Sachs and UBS. In M&A, although the markets were tough, Citigroup was still up there slogging it out with the best. In announced transactions, Citigroup comes second only to JPMorgan. In cash management and custody, while some banks prove to be highly competitive in certain product areas, Citigroup can claim to be competitive in all. And its momentum is growing, even in markets that have defeated others. In India, for example, Citi grew its cash management business by a further 25%, and added another 100 names to its client list.

Citi is not just a regional player, in many countries it competes with local retail and wholesale banks too. In Thailand, for example, it is by far the most diversified and largest foreign player in terms of assets and deposits. And it has over 500,000 customers. In Malaysia the bank dominates the credit card business with a 25% market share. It also claims a 10% market share in the mortgage market.

Goldman Sachs returns to the top of the equity tree in Asia, knocking UBS aside to take the best equity house award. Although UBS still has an exceptional regional equity business and managed to execute several significant deals, it didn’t manage to pull in the same number of high-profile, market-changing transactions that Goldman did. Goldman Sachs raised more capital for Asian issuers than the number two and three banks, UBS and Citigroup, combined. And it had success not only in straight equities but also in equity linked.

It was between June and November when equity markets were at their most turbulent that Goldman’s performance stood out. Even Morgan Stanley and Merrill Lynch slipped when they were forced to downsize China Telecom’s important IPO by 55% in November. Goldman, however, had no such trouble and successfully completed eight deals out of eight during a period when Asia’s markets tumbled 26%.

For the 12-month period as a whole the bank executed six of the region’s 10 largest equity and equity-linked deals. There was the Bank of China (HK)’s $2.7 billion listing and in Japan it took JR East public in a $2.14 billion offering. In May it topped everything off with Promina’s $1.2 billion offering in Australia, the largest such deal so far in 2003 globally.

Goldman’s biggest success story, however, was in Korea, where it has turned its business from an also-ran to a leader. From June 2002 it executed the most issues across a range of industries, including SK Corp and SK Telecom’s $1.25 billion largest ever exchangeable bond offering out of Asia. But Goldman and its focus isn’t just confined to the more mature markets or northeast Asia. In June 2002, it was involved in the largest IPO out of Malaysia since 1995, for Maxis.

Competitors are now anxiously waiting to see whether it can do in Australia what it has done in Korea. And many houses will be especially nervous now that Goldman has merged its Australian operations with local broking house JB Were.

Citigroup’s debt business continues to grow in strength. No other house comes close in breadth and depth of coverage, leaving it ahead as the winner of the best debt house award. It completed deals in all markets across Asia.

Citigroup ranked number one in debt financings for the year from June to June, raising $9.9 billion. In the syndicated loan business it again topped the tables, with a total volume of $4.2 billion. In G3 currencies it ranked second behind JPMorgan. And in the domestic local currency market it sits just behind HSBC.

HSBC also had an extremely successful year in all these businesses and took part in some high-profile transactions. However, unlike Citigroup, its domestic currency business is still predominantly centred on Hong Kong. Citi’s business is more diverse and challenges the top local banks in a larger number of countries. In Taiwan it is by far the largest arranger of domestic bonds, in India it is dominant in the securitization market and in Singapore it is challenging strongly for DBS’s crown. In addition, Citigroup’s deals have been as mixed as they have been high profile. In July it took Telekomunikasi Indonesia to the market for the first time with a local currency Rp1 trillion (US$116 million) offering. In Korea it was the coordinating arranger and joint bookrunner in Wilhemsen & Wallenius’s US$1 billion acquisition financing of Hyundai Merchant Marine’s car carrier division. In Malaysia it followed up Petronas’s $2.7 billion dual-currency bond offering, the largest corporate bond issue from Asia, with a $950 million reopening. And in Australia Citigroup was the sole bookrunner for Carter Holt Harvey’s A$500 million (US$333 million) multi-tranche syndicated loan. Add to these its ability to offer all products in all countries, something again that no other bank can claim, and the title of best debt house becomes even more apt.

It was a tough year for M&A bankers. Many found themselves thrown on to the street as banks slashed headcount. Yet in all the melee Morgan Stanley kept its head down and continued to complete deals while competitors found that announced transactions remained just that – announced but uncompleted. Though not topping the league tables by volume – that honour goes to Goldman Sachs courtesy of a US$10 billion asset injection by China Mobile – Morgan Stanley successfully closed 51 transactions across nine markets in a wide range of industries, giving it the award for best M&A house.

It’s not all about numbers. Some of the deals closed will shape industries and sectors as regional economies develop. Clear examples are Kawasaki Steel’s US$13 billion merger with NKK in Japan, the largest M&A deal completed over the past year. The house is also advising Daewoo Motors on its US$2.8 billion sale of assets and businesses to General Motors and some of its creditors. Throw in 42 overseas subsidiaries, some disgruntled creditor banks and some extremely vocal unionists and tear gas, and that deal stands out as one of the most complex and politically sensitive transactions to come out of Asia. It is an important, if difficult, step on the road to corporate Korea’s rehabilitation.

Still in Korea, Morgan Stanley successfully helped Hana Bank acquire the Goldman-advised Seoul Bank. In another high-profile politically sensitive case, the domestic acquirer, Hana Bank, overcame a determined and aggressive bid for Seoul Bank by private-equity giant Lonestar. By putting together a carefully structured transaction, Morgan Stanley helped create a new big Korean bank capable of competing with such rivals as Kookmin and Woorie.

Morgan Stanley also had a great year in China and differentiated itself from competitors by completing more deals across widely differing businesses. It advised those coming to the market as well as acting for the domestic targets. In telecoms there was Huawei’s and 3Com’s joint venture. And in financial services it advised Newbridge Capital as it attempted to get an grip on Shenzhen Development Bank. Morgan Stanley was also involved with transactions in power – China Resources’ US$300 million acquisition of Shajiao power plant – and in brewing – Anheuser-Busch’s US$182 million increased investment in Tsingtao Beer. In Taiwan it was involved in the sell-down of Chunghwa Telecom. And in Australia it advised on the sale of Natsteel to Flextronics and Placer Dome’s takeover of AurionGold.

Citigroup’s broad network provides a strong advantage over its rivals in cash management. This covers 14 countries and has sucked in over 10,000 customers ranging in size from world-conquering multinationals and government agencies to medium-size local enterprises.

In a year when many companies were concentrating on saving costs and streamlining the number of banks that they do business with, far fewer requests for proposals were sent out and there was less new business for banks to chase after. What business there was, Citi took the lion’s share of: winning 84% of the publicly tendered regional cash management bids.

With its broad in-country banking network Citigroup has access to over 1,000 clearing centres – the only regional player that can offer such a centralized service. On the tech-side of the business, CitiDirect Online Banking continues to pick up customers. Now over 3,000 customers across Asia are using Citi’s internet offering to sort out their daily needs. That’s 15% more than in the previous year. In addition, in 2002 two further regional internet products were launched: Citigroup e-Billing and CitiConnect.

In the more specialized local markets Citi continues to keep up with local demands. In China, the market that all banks will have to get right, Citigroup Easy Payments was launched. This enables Chinese corporates to make local currency payments in over 7,000 locations on the mainland. It is now the largest foreign bank in terms of renminbi payments and collections, with a market share in excess of 25%. In Japan it can claim to be competing on level terms with the local banks as it is the only bank to be a member of all the major clearing houses in the country. It also launched Citigroup Post Office Card Cash Collection Service, which opens up 20,000 post office branches to Citi’s customers, enabling them to make payments. In Singapore, a market famous for multinational and foreign companies, Citi has still managed to make inroads into the domestic market, with over 50% of its customers local.

Citigroup is the only all-encompassing custody provider in Asia able to offer global custody and sub-custody. Although other banks, such as HSBC and Standard Chartered, may be strong in the sub-custody business and compete head on with Citi very successfully, they are nowhere to be seen in global custody. Deutsche Bank attempted for a while to compete, but after realizing it was never going to achieve the necessary scale it sold out to State Street, which in turn fails to offer sub-custody services. In addition to these very important businesses, Citigroup also has a funds administration business, clearing facilities, depositary receipts programme and agency and trust services. With so much more to offer corporates around the region it is no surprise that Citigroup had yet another successful year in growing its custody business. It won a further 300 deals, adding a $60 billion of new assets to the over $300 billion already under custody. Given slow securities markets, competitors would find it hard match such performance.

HSBC takes the award for risk management and treasury. It has the largest dealing room in the Asia-Pacific, which is based in Hong Kong, and there are another 19 scattered around the region. With such a presence it can give customers a broad product offering. The bank’s market penetration is second to none. In derivatives and foreign exchange it is number one in Hong Kong, China, Singapore, and Indonesia. Its foreign exchange alone is ranked first in Malaysia, Philippines and Taiwan as well. HSBC is also becoming innovative on the technology side. The bank is pioneering a system called Derivatives Application Sales Tool. This enables it to map in totality its customers’ risk profiles and, it is claimed, enables the bank to offer products specifically needed by the customers.

HSBC’s domestic currency products range is also extensive. It offers the whole run from the simplest to the most complicated structured products in any of the major markets, regulations allowing. And its portfolio of complex risk management solutions is getting ever wider. In the past few months it has added a further six new credit derivatives offerings for clients. New ones include hybrid-coupon credit-linked notes and zero-coupon credit-linked notes.

Although the bank has a strong reputation in Hong Kong for such innovation, it perhaps does not get the recognition it deserves for breaking new ground in risk management region-wide. In the past year it made several innovations. In India, it is the only bank to have executed a US dollar versus Indian rupee Mifor basis swap. In Singapore it is the only bank to have introduced Singapore dollar financing through a packaged Hong Kong dollar floating-rate note swapped through Singapore dollars. And it was the first bank to structure and offer a global Islamic bond for the Malaysian sovereign. In addition to this, independent market surveys place HSBC as the bank most likely to use customized or exotic derivative structures in order to satisfy customer needs. In risk management and treasury HSBC is well ahead of peers.