Can Deutsche Bank sustain its remarkable run in Asia-Pacific investment banking in the first half of 2009 and secure a permanent standing as a top-three player across debt, equities and M&A?
It has been traditionally regarded as a solid debt house with strong flow business that dabbles in equities and mergers. The German bank was 11th on the Dealogic table for Asia-Pacific equity bookrunners in the Euromoney awards period of April 1 2008 to March 31 2009, and while rivals describe it as a credible competitor, none would rank it in their top five. Yet in the first half of this year the firm has won a plum IPO mandate, secured a joint venture with Shanxi Securities that should stand it in good stead to participate in the expected flood of China IPOs to come, and moved from 10th place to second in the Dealogic rankings for Asia-Pacific core investment banking revenues.
Deutsche Bank has beaten its more vaunted rivals to join Morgan Stanley as one of two global coordinators on the forthcoming IPO of American International Assurance (AIA), the Asian arm of troubled US insurer AIG. The deal, industry insiders say, will secure the two firms extremely generous fees and was the most sought-after mandate in the region in the first half of 2009.
The global coordinator role is typically the most lucrative on a large IPO, and Asia’s remaining equities franchises are left hoping that they will secure consolation mandates as bookrunners on the deal. In a region starved of large IPOs over the past 12 months, the AIA deal will stand out all the more, with market participants estimating a total value of more than $5 billion. The IPO follows a failed attempt to find a buyer for the business earlier this year, when several Chinese firms – including China Life – were reported to be interested but no deal was signed.
Hong Kong’s capital markets bankers are eagerly discussing Deutsche’s win, with several theories doing the rounds. One holds that Deutsche Bank has been the beneficiary of Morgan Stanley’s desire not to have a fellow US bank share in the fees and the glory associated with the deal.
Most market participants expected Goldman Sachs and Citi to win the mandate, since they were familiar with AIA’s assets, having worked on the failed attempt to find a buyer earlier in the year. UBS, as the region’s top-ranked equities house, was also thought to be a strong contender but Euromoney understands that the Swiss bank was not invited to pitch.
Another source more closely involved with the negotiations is more generous, suggesting that Deutsche Bank put together a very convincing pitch that set forth what the firm could do for AIG not just on the IPO but in dealing with some of its toxic assets. That allowed the bank to win the mandate on its own merits, the source said, with Deutsche Bank’s relatively unscathed balance sheet and reputation a further incentive.
With the firm’s ascent up the M&A league tables in the last couple of months and the likely impact of the AIA deal on the year’s equity capital markets table, Deutsche has some of its more established competitors in Asia taking notice. There is an element of good fortune involved in Deutsche Bank’s standing in the region, both in its securing of the AIA mandate and more generally in its ability to operate unimpaired by huge losses in the US and Europe. It will take more than good fortune to sustain the run. But it is putting in place the building blocks to become one of the investment banks to beat in Asia over the next 12 months.
