 |
Best Bank: HSBC |
It was not a vintage year for HSBC in its home market. Profits before tax fell by 28% to HK$38.6 billion ($5 billion), the bank’s $17.5 billion rights offering came later than it should have in the eyes of some analysts, and local media reacted with dismay when it slashed the interest rate on Hong Kong dollar savings by 90% to 0.001% – prompting one commentator to note that one would have to deposit HK$2 million at HSBC for a year to earn enough interest to buy a small cup of coffee. Despite its setbacks, however, HSBC is still the dominant bank in Hong Kong and none of its peers did well enough to dislodge it from that spot. The bank’s personal financial services department serves 90% of Hong Kong’s population, its treasury and risk management operations dominate the local market, and it is the top provider of capital-raising services for Hong Kong’s companies. One statistic will suffice to demonstrate the dominance of HSBC’s debt team in their local market: in the period from April 1 2008 to March 31 2009, HSBC was bookrunner on bonds issued by Hong Kong companies worth a total of $2.6 billion, more than the total volume of the next five bookrunners combined.
The Hong Kong equity capital market was much quieter than debt, with HSBC’s rights offering being as much a London-based transaction as a local one. Citi did not participate on that deal, but deserves the accolade of best equity house in Hong Kong for its overall activities, which included the successful reopening of the IPO market with a $133 million deal for Real Gold Mining and an innovative offering for Champion Reit that combined follow-on share issuance, a convertible bond and loan financing for a total of $980 million. The US bank was sole bookrunner on all three asset classes of the transaction, demonstrating the breadth of its platform and achieving real value for the client.
China Merchant Bank’s acquisition of Wing Lung Bank was probably the most significant Hong Kong-based M&A deal of the year, and while the long-term benefits of the deal to the acquirer may be real most analysts think that CMB overpaid. Two other big Chinese banks were bidding on Hong-Kong based Wing Lung when the Chinese government intervened to prevent a destructive bidding war; CMB’s surprise victory might prove to be a masterstroke but there are too many questions over the price paid for its advisers to scoop this award. Shareholders sold their holdings in Wing Lung at a 76% premium to the unaffected price, a valuation of more than three times book value or very good money in plain terms. Credit Suisse and UBS were the advisers credited on the sell side of that deal but neither did much else in Hong Kong during the year. Morgan Stanley, however, acted as the independent adviser to Wing Lung’s board committee but also worked on a complex acquisition for China Resources Logic of assets of its parent company worth $489 million and replaced Lehman Brothers on the Hong Kong end of Citic Group’s privatization of the 30% stake of its international financial holdings company. For that array of deals Morgan Stanley narrowly deserves to beat its rivals to the title of best M&A house in Hong Kong.
