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Best Bank: Resona Holdings |
It was another miserable 12 months for Japan’s banks, with the three megabanks, the tier below them and the smaller regional banks all suffering as domestic bankruptcies from the plummeting economy caused NPL levels to rise and Lehman Brothers-related investments turned bad. Total losses from bad loans among the top banks amounted to ¥1.7 trillion ($17.6 billion) and the three largest financial groups – MUFG, Mizuho FG and SMFG – all reported heavy losses for the year. That left Resona Holdings, Euromoney’s best bank in Japan in 2007, as this year’s winner after the group posted a profit of ¥123 billion despite the hellish environment.
Resona, the country’s fourth-largest bank, has differentiated itself from its bigger rivals via a sound strategic move. During the six years since it was nationalized it has offloaded over ¥1 trillion of cross-shareholdings, the much-criticized webs of inter-company share ownership that have characterized the country’s corporate relations for so long. While the three megabanks have had to write down huge portions of these shareholdings as Japan’s equity markets fell this year and last, Resona has emerged relatively unscathed and became for the first time the country’s most profitable bank.
Mizuho Financial Group is Japan’s best debt house; or rather it contains the country’s best debt houses. The firm took a 25% market share of the league table for all debt activity in Japan in the Euromoney awards period, underwriting more than $62 billion-worth of deals compared with $41 billion for second-placed Mitsubishi UFJ Securities. Mizuho’s customary rival for the top spot, Daiwa Securities SMBC, slipped to fourth place behind Nomura. That league table position is slightly unfair, however: it includes deals from Mizuho Corporate Bank, whereas Daiwa Securities as a semi-independent broker is not credited with deals from a corporate banking affiliate. Japan’s securities firms have not always been recognized for their easy dominance of the domestic market in this publication’s awards, the reasons being that their relationships with their corporate banking parents make their work easy for them and that they could do better in innovation and in international deals. This year, however, Mizuho Financial Group is a deserving winner for the combined efforts of its corporate bank and securities arm. Mizuho Securities was like Daiwa a bookrunner on Panasonic’s $4.2 billion bond in March, the largest-ever by a Japanese company, and the two appear together on several of the year’s top deals. Mizuho, however deserves the nod for being on NTT Docomo’s billion-dollar bond efforts and for the efforts of its corporate banking division on debt-raising for state agencies such as Jehdra; together Mizuho Securites and Mizuho Corporate bank form the most complete debt-raising team in Japan’s domestic market.
Nomura, Japan’s best equities house and its best M&A firm, is undergoing a turbulent period to say the least. In its home market it had a reputation to recover after an insider trading scandal last year: a senior member of the firm’s capital markets division admitted to Euromoney that the issue had cost the firm several key deals. Outside Japan the firm is busy integrating its acquisition of Lehman Brothers’ Asia operations, finding itself competing against top banks that might previously have ignored it and working out which markets it wants to compete in.
It was all the more impressive, then, that Japan’s top investment bank retained its dominance of its key markets. In M&A the firm had one misstep – the Daiichi Sankyo/Ranbaxy deal in which the Japanese acquirer lost value on its prize after problems emerged with Indian firm Ranbaxy’s FDA approvals – but the broker insists its client was aware of the issue going in to the deal and its record elsewhere is unimpeachable. Nomura was sole adviser on both Kirin’s $1.2 billion acquisition of San Miguel Brewery and rival Asahi’s purchase of a 19.9% stake in China’s Tsingtao – the fact that the firm worked on key deals for both of the country’s top beverage firms demonstrates the benefits even within Japan of the Lehman acquisition, with that team adding a new client relationship to Nomura’s arsenal. Other key Nomura deals included NTT’s acquisition of a stake in Bangladesh’s TM International, another Asahi deal involving the acquisition of Cadbury Schweppes Australia, a domestic restructuring deal in the semiconductor sector involving Rohm Co, and another outbound deal for TDK as it bought Epcos. While foreign firms including JPMorgan and Morgan Stanley had typically solid years in Japanese M&A, Nomura is now competing with them on the big cross-border deals as well as dominating the home market.
In equities Nomura is a much more straightforward champion: it has a 44% market share in Dealogic’s table for all equity capital markets bookrunning, comfortably beating the competition. The firm is involved in almost every key deal in Japan: this year’s highlights included the ¥417 billion deal for Mitsubishi UFJ Financial Group, in which Nomura was a global coordinator, IPOs for Taiko Pharmaceutical and Hoshizaki Electric, a sole bookrunner mandate for the firm’s own holding company, and a total of ¥70 billion-worth of Euroyen convertible bonds for top client Asahi.
