Lead banks sit pretty atop volatile market | Capital raising results tables
Citigroup and Deutsche Bank trade places at the top of this year’s Euromoney overall capital raising poll, with Citigroup reclaiming the top spot and Deutsche dropping to second. Completing the podium places is Barclays Capital, which continues its steady rise up the rankings (it finished ninth in 2002 and fifth last year). One impressive mandate was acting as joint bookrunner on Autostrade’s €6.5 billion euro and sterling bond issue in May — one of the few highlights of the summer, and a deal that suggests that Barclays Capital is being rewarded for leading with its balance sheet.
But perhaps most significant, the list of top 10 banks for capital raising in 2004 is identical to that for 2003. Last year’s only new entrant, ABN Amro, consolidates its position, again ranking seventh.
In clients’ minds, capital raising should be done through an increasingly self-selecting group of investment banks that can provide balance sheet, global distribution, and secondary market trading and support, be that in bonds, loans, foreign exchange, or any other related product.
“The big picture is quite simple,” says David Poole, COO of research and advisory firm ClientKnowledge. “If a borrower’s question is: ‘How do I look at the debt on my balance sheet?’ a bank needs to understand that client from more than one product area’s point of view.” This year, with many borrowers shunning complex trades, that means doing the simple things well. “For most large companies, FX is a very liquid, theoretically simple, day-to-day requirement. Cash management is too, as is credit provision,” says Poole.
Although banks might not be explicitly rewarded for providing these products, it is bad news for them if they fail to do so. If they cannot provide a full service, they will lose mandates. “If you haven’t got a credit relationship it can be very difficult to get any business,” says Poole. If you have got a credit relationship, it can be very difficult to get any business too.
“Loan prices have gone through the floor,” says Citigroup’s head of European corporate DCM, Eirik Winter. “There are probably 15 top banks that can lend, and one-third that number who can combine a long-term relationship with balance sheet and deliver products around it. If you think you can get business on the back of your balance sheet, those days are gone.”
Borrowers know they are in a strong position. “The gap between pricing on bank debt and what you can achieve in the capital markets is that much wider,” says David Swann, group treasurer, British American Tobacco. “Therefore there’s a lot more pressure on the banks to fill that gap in terms of ancillary and peripheral business. We’re not complaining.”
