Best emerging market investment bank

2009 Awards for Excellence
Bank	Investment bank	M&A house
DCM house	ECM house	Risk management house
Foreign exchange house	Commodities house	Short-term debt house
Corporate restructuring house	Securities restructuring house	Sovereign advisory
Project finance house	Equity derivatives house	Structured products house
Transaction banking house	Investor services house	Wealth management house
Private equity house	Hedge fund	Emerging markets bank
Emerging markets investment bank	Emerging markets DCM house	Emerging markets ECM house
Emerging markets M&A house

JPMORGAN: The US bank is one of the winners in the financial crisis and nowhere more so than in the emerging markets

Also shortlisted in this category: Credit Suisse, Morgan Stanley

JPMorgan’s strategy in the emerging markets is simple: stay close to clients and help them with their liquidity and capital needs when necessary. Other banks, no doubt, have a similar mantra. No other, though, is able to match the US bank’s consistency in delivering results across products and regions. “Our greatest quality is to be a full-service investment bank in all market conditions,” says Daniel Pinto, head of emerging markets at JPMorgan.

“Last year was a record one for us in the emerging markets in terms of profits” Daniel Pinto, JPMorgan

As one of the stronger banks to emerge from the financial crisis, JPMorgan is well placed to cater to its clients’ needs. Unlike many of its rivals, its balance sheet is not impaired, its management remains committed to riskier markets and it has kept hold of most of its talented people. This position of strength has enabled the bank to improve upon its performance. “Last year was a record one for us in the emerging markets in terms of profits,” says Pinto. Although the bank has made cuts in certain areas – for example, three Latin American debt stalwarts, Cynthia Powell, Mark Tuttle and Ricardo Rubio, were axed in December – Pinto says that the bank is committed to growing its emerging markets business. Those that thought that Jamie Dimon, JPMorgan’s chief executive, would pull the bank back from these markets could not have been more wrong.

JPMorgan continues to impress across all three main areas of debt, equity and M&A. Over the past year in debt the bank has brought such blue-chip Latin American issuers to market as Pemex, Petrobras and Peru. In emerging Europe, key clients included VTB and the Slovenian government while in Asia the high-yield offering from India’s Vedanta and the Samurai transaction by Korea’s Kookmin Bank stand out. In the Middle East, it led deals for Abu Dhabi and Qatar.

In equities, the bank is the leading emerging markets underwriter, with landmark transactions from every corner of the developing world. Its $11.6 billion deal for Brazil’s Vale is the biggest ever follow-on offering in the Americas. Priced in July 2008, it involved six different securities listed on three exchanges. The bank’s $2.8 billion rights issue for Singapore’s DBS and $783 million accelerated offering for India’s DLF showed that it was prominent in the two main types of transaction in the emerging markets in the past year. In central and eastern Europe, its $2.5 billion deal in May 2008 for coal company New World Resources, was the biggest ever IPO in the region outside of Russia. In the Middle East, the bank’s $2.5 billion IPO for Ma’aden was the last blockbuster emerging markets debut deal before the Lehman Brothers’ bankruptcy.

One of JPMorgan’s most impressive equity deals over the past 12 months was South African pulp and paper group Sappi’s R5.8 billion ($574 million) rights issue in November. Placed at a time of extreme market distress, the offering was fully subscribed. It was the second-biggest rights issue in South African history. The deal was undertaken to help finance the acquisition of a Finnish graphics business.

In M&A, the bank can point to an impressive array of deals. In Asia, for example, it was adviser to China Merchants Bank on its $4.7 billion acquisition of a majority stake in Hong Kong’s Wing Lung Bank. The bank also advised Sinosteel in its unsolicited takeover of Australia’s Midwest for $1 billion. This was another example of a Chinese corporate buying an international asset. The US bank was also involved in the biggest sponsor-led transaction in the region over the past 12 months, advising InBev on the sale of Oriental Breweries to KKR.

JPMorgan’s prospects in Asia for the rest of the year look good too. “Activity in terms of announced deals is down but the amount of dialogue we’re having with potential Asian buyers is the best I’ve seen,” says Todd Marin, head of M&A for the region.

He adds that interest from Asian corporates seeking to buy assets in Europe especially is at an all-time high: “The pipeline is very strong.”

JPMorgan has a good M&A record in Latin America, central and eastern Europe and the Middle East too, as well as South Africa.

As for where the bank sees the greatest opportunities, Pinto cites the Bric countries (Brazil, Russia, India and China), highlighting Brazil in particular. “Brazil has all the right ingredients,” he says. “It is a big economy with a sound government and rule of law. It has quite a benign business environment. There are global companies and the financial sector is solid.”

One trend that will help push the development of Brazilian products is local investors reallocating their assets out of government bonds as real interest rates continue to compress.

“The relevance of local investors [in emerging markets] is really growing,” says Pinto. “You need to be a strong local player in the key markets to win mandates.”

For the time being the bank’s local markets push is organic. Although Pinto does not rule out an acquisition for the investment bank, he says it is unlikely with the exception of somewhere such as China, regulators permitting. “In investment banking it’s hard to see what you can buy that can add value,” he says.