BEST BANK
Bank of Tokyo-Mitsubishi
BEST EQUITY HOUSE
Nomura Securities
BEST DEBT HOUSE
Mizuho Securities
BEST M&A HOUSE
Morgan Stanley
Japan’s economy continues its slow path to recovery, but the domestic banking sector continues to limp along with little sign of meaningful restructuring save for government-directed mergers. In a bleak domestic banking sector, Bank of Tokyo-Mitsubishi, part of the Mitsubishi Tokyo Financial Group, shows some of the more encouraging signs of financial health and wins the best bank in Japan award on this merit alone.
BTM is a full service financial institution in Japan with 248 branches that offers retail, commercial and corporate and investment banking products. Japan’s largest bank by assets, BTM will become larger still if a planned merger with UFJ Bank proceeds, as seems likely. Even so, BTM is already a massive operation, with $800 billion of total assets and an equity base of $33 billion. Unlike many of its domestic competitors, it is also profitable, with net interest revenue in respect of fiscal 2004 of $7.8 billion and net income of $4.6 billion.
With a return on average assets of just 0.6% and a cost-to-income ratio of a little more than 60%, BTM might seem more a laggard than a leader. In terms of peer performance, however, its ratios are positively stellar. Return on average equity is also a respectable 15.7%.
Nomura Securities continues to dominate Japan’s equity market and wins the best equities house award again. In the period under review, it raised $15.7 billion of capital from 160 equity and equity-linked issues, a vast market share of 26.17%. Its nearest competitor, Daiwa Securities, was nearly eight percentage points behind.
Most notable among the Nomura issues were the $3.4 billion IPO for J-Power, Shinsei Bank’s $2.9 billion follow-on offering, and oil company INPEX Corp’s $1.5 billion IPO.
In the secondary market, Nomura is also dominant, with the largest share of domestic trading and top-ranked research.
Japan’s best debt house is Mizuho Securities. Mizuho performed well across all debt products, including a number two league table position in loans, with $29.7 billion from 254 loan issues, a 26% market share, and number two in bonds (ignoring the self-led government deals) with $20 billion raised from 228 bond deals. It also enjoyed a significant market share in securitization deals.
In addition to managing all of the usual government and agency bond issues, Mizuho worked on the ¥300 billion ($2.7 billion) bond for Japan Highway. Mizuho also performed well in the international debt markets, unlike most of its competitors, raising $1.5 billion from 51 international issues, including a $400 million bond for Toyota Motor Credit and a $600 million bond for Japan Highway Public Corporation.
Morgan Stanley wins this year’s award for best M&A house by some margin. Having advised on 18 completed deals for a combined disclosed transaction value of $58.4 billion, Morgan Stanley leads the international M&A tables.
Among the most notable transactions that Morgan Stanley completed were the $594 million strategic alliance between Shinsei Bank and UFJ’s Aplus, the $3.9 billion leveraged buyout of Edison Mission Energy’s independent power producer assets by Mitsui & Co and an international power consortium, and the $7.2 billion merger between Yamanouchi Pharmaceutical and Fujisawa Pharmaceutical.
Morgan Stanley’s Japan M&A franchise is likely to continue to dominate in the year ahead given the backlog of announced but as yet not closed deals, including the $41.4 billion merger between Mitsubishi-Tokyo Financial Group and UFJ, which has already entailed a successful defence against Sumitomo Mitsui Financial Group, the $925 million acquisition of a 34% stake in Sumitomo Mitsui Card by NTT DoCoMo, and the $175 million sale by the Industrial Revitalization Corporation of Japan of Mitsui Mining to a consortium led by Daiwa Securities SMBC and Nippon Mining.
