Best bank
ICBC
Best equities house
Morgan Stanley
Best debt house
China International Capital Corporation
Best M&A house
JPMorgan
Financially, subject to the usual caveat associated with financial numbers produced by mainland Chinese banks, ICBC remains in relative financial health. Operating profit increased in 2003 to Rmb63.5 billion ($7.7 billion). Its non-performing loan ratio of 21.24% was down from 25.41% the previous year. According to the bank, estimated NPLs are in line with auditor Ernst & Young?s figures. ICBC appears set to weather the impending slowdown in China, managed or otherwise.
Equity issuance in the second half of 2003 and into the first quarter of 2004 showed tremendous growth over the corresponding period the previous year, widening the pool of candidates for the best equities house award. A number of houses gained footholds in China through large one-off IPO mandates.
Although it did not raise the most capital, Morgan Stanley wins the award since it completed more issues than most of its competitors and executed mandates of a higher quality. The one slip-up was of course the Tom Online transaction, which Morgan Stanley ran jointly with Citigroup. The first ever GEM/Nasdaq listing, it was launched amidst a Hong Kong retail IPO feeding frenzy and was widely panned as taking the shine off the IPO market when it performed poorly in the aftermarket.
Besides that, however, Morgan Stanley?s deal list is impressive. Arguably, it opened the market for large mainland financial issuers with the successful $802 million PICC Property and Casualty IPO, the success of which set the scene for the much larger China Life deal. Morgan Stanley also successfully resurrected a previously failed $222 million IPO for Shanghai Forte and raised $382 million for China Resources Power. Its $741 million sale of British Petroleum?s stake in Chinese oil company Sinopec was also very well executed.
The highlight in debt capital markets was the issue from the PRC government, a $1 billion offering that helped to vault some banks up the league table. With 90% of the market occupied by self-launched domestic issues with no bookrunner, the banks were left to fight over the crumbs. The bank that was most successful was China International Capital Corporation, which successfully raised $624 million from three issues.
Just as with the regional M&A award, JPMorgan and Morgan Stanley compete closely. The winner, JPMorgan, closed five deals during the period with a total value of $3.6 billion, more deals and a higher value than any other bank. Moreover, JPMorgan announced five transactions in 2004.
Several JPMorgan deals stand out for their quality and innovation. The $950 million acquisition of a 50% interest by Asahi Itochu in the beverages division of mainland foods concern Tingyi was the largest M&A deal ever in China?s consumer goods sector and a significant indication of increasing cross-border activity. JP Morgan advised Tingyi. The bank also advised Shui On Group on the $539 million restructuring of its mainland property interests into a new property entity and raised up to $450 million by way of private equity for the new company. The deal was the largest private-equity placement in China?s real-estate sector. In another transaction first, JPMorgan advised Motorola on the injection of its Tianjin semiconductor manufacturing facilities into Semiconductor Manufacturing International Corporation in exchange for preferred shares. This was the first such a transaction using stock as currency under China?s new M&A laws.
