Best bank
Shinsei Bank Best equities house
Nomura Securities
Best debt house
Daiwa Securities SMBC
Best M&A house
Goldman Sachs
Shinsei Bank, which was formed from the remnants of the Long-Term Credit Bank of Japan and controversially sold to a foreign-led investor consortium, is small by Japanese standards. It boasts just $60 billion of assets and only 29 retail branches, in a business it started only in June 2001.
Yet Shinsei punches way above its weight and is leading the way for bank reform in Japan. ATMs available 24 hours a day and seven days a week without charge, and branches open on weekdays until 7pm are revolutionary in Japan.
Shinsei is also financially the fittest bank in Japan by some margin. Net profit for fiscal 2003 was up 25% to ¥66.4 billion ($613 million). Non-interest revenues have jumped and now constitute most of the bank?s revenues. Non-performing loans are a meagre 2.8%. Tier 1 capital comprises 99% of core capital. Shinsei also has a capital adequacy ratio of 21%, again higher than any other large Japanese bank. Adjusted return on equity was 14.6% and despite Shinsei?s infancy, retail banking already accounts for more than half of its funding sources.
Critics, and there are many inside Japan who felt that the bank was given away to foreigners, will point out that Shinsei gained enormously from a government one-way guarantee. While it is true that the bank was able to put back questionable loans to the government as part of the terms of the acquisition, it does not explain the business turnround or the success of management?s strategy. Like it or not, the bank is an exemplar of all that still needs to happen in Japan?s banking system and on that measure alone it earns the best bank award.
Nomura has dominated the equity market for many years. Over the past 12 months, it led the league tables with a 28% market share, leading Japan?s two largest IPOs, the $2.4 billion Shinsei Bank offering and the $2.3 billion West Japan Railway IPO. It also handled share placements for blue chip companies, including Sharp, Matsushita, Softbank and Fuji Photofilm. Nomura comfortably raised more capital, $13 billion, from more issues, 139, than its nearest competitor, Citigroup Nikko Securities. This is Nomura?s third successive best equities house award.
Daiwa Securities SMBC takes the award for best debt house from last year?s winner, Nomura Securities, by some margin. In a market dominated by government-led fixed-income offerings, Daiwa led 167 issues and raised more than $22.8 billion, including the largest non government-related issue, the ¥180 billion Chuo Mitsui Trust Bank mortgage-backed securitization.
A result of the 1999 merger of the investment banking interests of Daiwa Securities and Sumitomo Mitsui Banking Corporation, Daiwa has cemented its position as Japan?s second-largest securities business, behind Nomura Securities. Its performance in the debt markets over the past 12 months, however, pushed even Nomura into second place by almost $6 billion.
Goldman Sachs has clearly got its model right in Japan, which is a difficult territory for foreign banks. It did not lead the M&A league tables, skewed as they were by the $16 billion restructuring/privatization of defunct bank Resona. In fact, Goldman was some way down the table, depending upon one?s definition of M&A. But it wins the award because of the quality and variety of genuine M&A transactions it completed.
Most notable was the $2.2 billion acquisition of Japan Telecom by US private equity fund Ripplewood Holdings, a key account for Goldman, which steered it through the successful IPO of its stake in Shinsei Bank. Other significant deals included the $1.6 billion sale of Mitsui Mutual Life Insurance by an investor group led by Sumitomo Mitsui Banking Corporation, the $489 million acquisition of Mitsubishi Fuso Truck and Bus by DaimlerChrysler, and the $380 million sale of NEC Plasma Display Corp to Pioneer Corp.
