BEST BANK
Shinhan Bank
BEST EQUITY HOUSE
UBS
BEST DEBT HOUSE
JPMorgan
BEST M&A HOUSE
Morgan Stanley
With the domestic banking market in Korea being shaken up by increasing foreign interest, many of the local banks are struggling to compete effectively. Shinhan Bank is not one of them and wins the best bank in Korea award by dint of its very strong financial performance and sound management.
Shinhan’s 2004 financial results reported a net interest margin of 2.26%, return on average assets of 1.18% and a cost-to-income ratio of 38.94%, all of which compare very favourably with domestic competition. Those results produced a return on average equity of 22.1%, one of the highest returns of any Korean bank.
The bank’s first-quarter results in 2005 demonstrate where the challenges lie for Shinhan as it begins to consolidate the acquisition of Cho Hung Bank, Korea’s oldest bank. While return on equity at Shinhan improved to 23.07%, when consolidated with Cho Hung Bank the return slipped. It is the same story across all relevant ratios, demonstrating the task ahead of Shinhan as it merges the two entities. With a combined 1,087 branches, almost 22,000 customers and 14,000 staff, there will doubtless be significant areas where Shinhan will seek to reduce costs. Given its performance within its own bank to date, the chances are that Shinhan management will have little difficulty in improving returns from the enlarged bank.
UBS is this year’s best equities house in Korea, leading the primary issuance league table by some distance with $1 billion raised from eight issues. Chief among these were the $1.01 billion IPO of the LG Philips LCD joint venture, the first ever simultaneous listing on the Korean and New York stock exchanges, a $1.1 billion convertible bond for the same client and two simultaneous placements for GS Holdings and LG Corp totalling $235 million.
Although the primary issuance base is narrow, relying on the LG group, UBS backs up its claim to number one spot in Korea with a clear dominance in secondary trading among international securities firms. It has held this lead for the past five years and boasts a market share of more than 15%. Its research team of 12 covers 71 stocks over nine sectors and it operates a dedicated Korean equities sales team of 14.
JPMorgan wins the best debt house in Korea award as a result of its performance across a wide range of debt products, even though it did not claim top spot in any of the league tables. It was number three in G3, fifth in bonds and seventh in local currency loans.
Where JPMorgan did excel, however, was in generating a good book of business across the debt spectrum, particularly in the more lucrative areas of high-yield debt. All told, JPMorgan managed seven debt issues, raising a total of about $1.5 billion. Included in this total were the $1 billion global bond for the Republic of Korea, a deal that was more than three times subscribed, a highly successful $600 million issue for KT Corp and two samurai issues for Korean borrowers, KEPCO and Hyundai Capital. There were also two very successful high-yield deals: a $500 million issue for Hanaro Telecom that was six times subscribed and a $750 million three-tranche issue for MagnaChip, which also included a $100 million revolving credit facility.
Morgan Stanley wins the best M&A house award in Korea, with CSFB close behind. Morgan Stanley heads the league tables with $4.18 billion of deals, a 21.6% market share, but it also comes out on top in the awards because it advised on an interesting range of transactions.
Morgan Stanley appears to have entrenched itself somewhat as the adviser of choice for recent Korean government share sales and advised Korea Deposit Insurance Corporation on the sale of Korea First Bank, and the government on the sale of Korea Investment Trust Management & Securities and Daehan Investment Trust & Securities.
Perhaps more interesting assignments, however, were advising JPMorgan Partners, UBS Capital (since renamed Affinity Capital) and CVC Asia on the sale of Haitai Confectionery, and eBay on the $485 million purchase of Internet Auction Co.
