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AustriaBest bank: Bawag Group
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Bawag Group was the momentum player in Austria again last year as the results of the group’s radical transformation began to feed through. Despite completing multiple acquisitions and integrations through 2017, as well as a landmark IPO in October, the lender managed to produce another year of record results. Pre-tax profit for the group was up 12% to €517 million, driven by stellar growth in the Austrian retail segment. Bawag PSK Retail, the group’s main outlet in its home market, posted a return on equity of 29.8% on the back of a 33% increase in pre-tax profit.
New loan originations for the year totalled €1.4 billion, with the bulk of new business coming from consumer lending and mortgages. The bank issued €476 million of new consumer loans last year, boosting its market share in the segment to 12.1%, and €691 million of housing loans, helped by the purchase of start:bausparkasse in late 2016. On the funding side, the unit continued the shift from high-cost fixed-rate term deposits to current accounts and daily savings accounts.
Meanwhile progress continued on digitalization, including the introduction of cybercrime security insurance and a peer-to-peer payment capability. In January, Bawag PSK also announced a partnership with online lender Spotcap to offer fully digital same-day financing to SMEs in Austria.
The group’s direct banking subsidiary, Easygroup, also had an outstanding year, posting a pre-tax return on equity of 32.2% and growing its customer base by more than 150% through a combination of strong organic growth and the acquisition in October of PayLife, the card-issuing business of SIX Payment Services Austria.
October also saw the successful completion of Bawag’s €1.7 billion IPO on the Vienna Stock Exchange, the largest ever by an Austrian entity. Bawag continues to push beyond its home market, with two acquisitions in Germany last year and increased corporate lending in Germany and Switzerland, but for the moment Austria remains the group’s growth engine and profit driver.
The award for Austria’s best investment bank goes to Goldman Sachs in recognition of its strong capital markets franchise and continuing status as the go-to house for complex, large-scale M&A transactions. The US firm secured mandates as sole sell-side adviser on two of the year’s largest M&A deals from the jurisdiction. The bank advised listed Austrian residential property firm Buwog on its acquisition by Germany’s Vonovia, a €5.2 billion all-cash deal that was signed in December after 73.7% of Buwog shareholders responded to Vonovia’s tender offer. Goldman also advised French private equity firm Wendel on the €1.15 billion sale of its Austrian packaging business, Constantia Flexibles, to US firm Multi-Colour.
In debt capital markets, Goldman Sachs was well represented in the sovereign and quasi-sovereign deals that made up the majority of Eurobond issuance from Austria last year and led a €500 million additional tier-1 for Erste Group. In equity markets, Bawag’s IPO was the landmark deal. Goldman was a global coordinator on that listing, as well as on Buwog’s €306 million capital raise last June.
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BelgiumBest bank: KBC
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A focus on efficiency and good fee and commission income continue to make KBC one of the most profitable banks in Europe, with a return on equity in the mid-teens and a cost-to-income ratio of 54%. It is Belgium’s best bank.
Despite the impact of negative interest rates on net interest income, the bank made more than €2 billion in net profit in 2017, with net fee and commission income up by 17%. It also saw growth of around 5% in its loan book, largely thanks to above-average loan growth in Belgian retail, as well as its presence in faster-growth emerging European markets, principally the Czech Republic.
The international acclaim the bank has received, including by Euromoney in last year’s global bank transformation award, was again in evidence in 2017 when Harvard Business Review ranked KBC’s chief executive Johan Thijs one of the top 10 best-performing chief executives in the world in 2017 – the only bank leader to reach the top 50.
Despite strong competition in the Benelux region in the area of banking technology, the use of digital channels is crucial to KBC both in its banking and insurance businesses. Its tie-ups with partners, such as Payconiq (mobile payments) and Doccle (document management), have hundreds of thousands of users. At the end of the awards period it also launched its multi-banking function, enabling clients to check balances with other financial institutions in line with the EU’s payment services directive.
Meanwhile, KBC completed its €610 million acquisition of United Bulgarian Bank (UBB) and Interlease from National Bank of Greece in June 2017.
KBC’s UBB acquisition was also one of the key 2017 deals by Belgium’s best investment bank, Rothschild & Co. Its Belgian business is by no means an afterthought to a wider European strategy centred on Paris and London. The importance of Belgium to Rothschild was underlined in 2016 when it announced the acquisition of L&Co, whose founding partners Frank Demoen and Yves Vervaet brought with them a team of seven Brussels-based advisory bankers. The fruits of that acquisition could be seen in the awards period.
In the chemicals sector, Rothschild advised on Blackstone’s partnership with Belgian firm Solvay. This included the divestment of Solvay’s cellulose acetate tow business, Acetow, to private equity funds managed by Blackstone, which was completed in June last year and based on an enterprise value of €1 billion, resulting in a net financial debt reduction of some €700 million.
In another private equity deal, Rothschild advised on the purchase by the Carlyle Group of Belgian airports group ADB Safegate. The firm also advised the Belgian gas infrastructure company Fluxys on the acquisition of an additional 25.57% stake in Interconnector UK, making Fluxys and its Canadian partner CDPQ the sole shareholders in the British firm, in a £75 million transaction.
Its smaller advisory deals in the period – the fruits of a long-standing Belgian business for deals below €100 million – covered sectors as diverse as animal nutrition, veterinary products and a manufacturer of vehicle tow bars.
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CyprusBest bank: Hellenic Bank |
Tourism and stronger private-sector consumption are driving a robust economic recovery in Cyprus. The big three banks, however, still have much to do in offloading the non-performing loans that still make up around 40% of their balance sheets.
Given the importance of this task, Hellenic Bank deserves recognition in part for its efforts to free its balance sheet of bad debt through portfolio sales ahead of other banks, and is Cyprus’s best bank. It has blazed a trail that other Cypriot banks could follow, with an early 2018 agreement to sell a portfolio of €145 million in gross outstanding secured and unsecured corporate exposures to B2Holding, a Norwegian emerging-European NPL specialist.
The awards period also saw Hellenic sell its NPL and real-estate management business to APS, a Luxembourg-based NPL servicer focused on central and southeastern Europe – resulting in the formation of the country’s first independent loan servicer, APS Cyprus.
In contrast to its peers, Hellenic Bank announced a marked drop in its losses in 2017 results. It then returned to profit in the first quarter of 2018, with net income of €28.6 million. The strengthening of its CET1 ratio to 14% is another potential prop to its NPL reduction efforts.
Meanwhile, the outflow of private-sector deposits from Cyprus Cooperative Bank in early 2018 shows the sector remains fragile, even if on this occasion a large government deposit might have stemmed the scare. A sale of Cyprus Coop’s performing assets to Hellenic could be a further boost both to Hellenic’s franchise and to the island’s financial stability later on.
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DenmarkBest bank: Danske Bank
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Denmark occupies an unusual position in Europe’s banking landscape – somewhere between the oligopolistic high-profit Swedish market and the ultra-competitive low-profit German sector. It missed out on the possibility of becoming home to Scandinavia’s biggest bank this year, as Nordea briefly looked like it might consider Copenhagen after deciding to exit its Sweden group domicile but then chose Helsinki.
Denmark is nevertheless already home to what is in some respects a better-performing pan-Nordic bank, albeit one smaller and more focused on its home market – Danske Bank, Denmark’s best bank.
Danske is seeing especially promising growth in customers outside Denmark, notably in Norway and Sweden, in part thanks to its front- and back-office digital advances. Its digital initiatives of course greatly help the home market too, which it is by no means neglecting, as shown in the life and pensions space with an agreement to acquire SEB Pension Danmark in December.
Overall, Danske’s loan book grew by 2% and deposits by 6% in 2017. In terms of income, the bank also had a good 2017 as net profit rose by 5% to DKr20.9 billion ($3.25 billion). Return on equity rose to 13.6%, while the efficiency ratio was stable at 47% despite higher compliance costs. The CET1 ratio rose to 17.6%.
Looking ahead, the provision reversals that contributed to the 2017 profits may not contribute as much in 2018 and 2019, especially if the Nordic real estate sector sparks a wider slowdown. Nevertheless, analysts still think the bank will surpass its long-term return-on-equity target of 12.5%.
In investment banking, there is a flavour of pan-Nordic integration with the success in Denmark of a firm originally from Sweden, Carnegie, Denmark’s best investment bank.
This is not to say that Carnegie is a new entrant to Denmark – indeed, it has bolstered its presence at a time when other banks have cut back. Carnegie’s investment banking team in Denmark now numbers more than 30, including seven directors and managing directors. Its client range includes multinationals operating locally, well-known Danish brands such as Bang & Olufsen, the country’s biggest banks, family offices and real estate funds.
Among Carnegie’s biggest deals was a DKr1.67 billion placement of shares in Jyske Bank for BRF Holding in September, on which it was sole bookrunner. It advised H+H International on its DKr818 million acquisition of Germany’s Heidelberger Kalksandstein. Carnegie was global coordinator on two Danish IPOs in November: for biotech firm Orphazyme, raising DKr600 million; and kitchen maker TCM, raising DKr686 million.
The TCM IPO, involving a sale by IK Investment Partners, was evidence of its financial sponsors franchise – it also advised Danish players Axcel and VKR Holding, for example, in their divestment from Danish ventilation-products manufacturer Exhausto, and then advised Axcel again on its purchase of aluminium accessories supplier Mountain Top Industries. On the other side of the private equity table, it advised on the divestment of damage control and restoration firm Dansk Bygningskontrol to Polygon Group, owned by Triton Partners.
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FinlandBest bank: Nordea
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In September, Scandinavia’s biggest and most diversified lender announced a decision to move its headquarters from Stockholm to Helsinki. As such, Nordea – Finland’s best bank – became truly Finnish.
Although the move will not officially happen until autumn 2018, it is already a Finnish-based group in spirit. Finnish insurance group Sampo has been Nordea’s largest shareholder since 2009. It has had a Finnish chief executive, Casper von Koskull, and chairman, Björn Wahlroos (also Sampo’s chairman) since 2015 and 2011, respectively.
As the Swedish housing market has begun to slow, once again, Nordea’s possession of top banks across the region has begun to look more attractive than a focus on the most profitable market, Sweden. Certainly, the news of the headquarters move has not caused a big scare. Nordea issued additional tier-1 debt at a record low coupon of 3.5% in November.
Nordea has placed Finland at the head of its front- and back-office digital push, including its new core banking platform, which has served its first customers in Finland.
Finland remains arguably the market where Nordea is best-placed, not least because it is the one where it has the largest market share. Its 2017 profit in Finland held up a lot better than that in Denmark and Sweden, and better than Finnish mutual group OP.
Nordea’s leadership in Finland is just as evident in investment banking as it is in commercial banking. It was the only firm to hold a top spot in the Dealogic league tables across debt, equity and advisory.
Nordea’s deals in the period in Finland include acting as financial adviser to Lemminkäinen on its merger with fellow developer YIT and to Blackstone on its €1.7 billion public takeover of another real estate firm, Sponda.
It was sole global coordinator on the €271 million IPO of state alcoholic drinks company Altia and on the €98 million IPO of eye-care and optical firm Silmäasema. It was also adviser to the sellers of local manufacturing firm Maillefer International to Davis-Standard in the US.
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FranceBest bank: Crédit Agricole
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For French banks, last year was one of great promise: there was the election in May of a pro-business and Europhile president; the symbolically important decision in November to relocate the European Banking Authority from London to Paris; and an agreement on Basel III in December that was relatively easy on their structured finance businesses.
One big French bank that does not always get the international recognition it deserves is Crédit Agricole, France’s best bank. The listed entity, Crédit Agricole SA (CASA), has become the highest valued of the big three French bank stocks – the only one trading above book value – and for good reason.
French banks have tended to view themselves as financial supermarkets: a mortgage, for example, being the anchor of the customer relationship rather than the anchor of retail profit in itself. Crédit Agricole has continued to lead with that strategy, with recent gains in market share in home loans outpaced for example by market-share gains in insurance, including life and non-life.
Crédit Agricole is the biggest European bank-insurance group, as well as one of the biggest consumer finance houses. Its asset-management arm, Amundi, with more than €1.4 trillion assets under management, is becoming a role model for bank-owned asset managers in Europe. Amundi’s acquisition of UniCredit’s asset management arm, Pioneer, completed in June 2017, was another boost to the firm, whose shares have risen by around 50% since its 2015 listing.
CASA’s credit default swaps, meanwhile, might be a better reflection of the wider group performance than its shares, due to internal guarantees. Its CDS spreads have fallen to the lowest of the five biggest eurozone banks by assets, in part thanks to a group CET1 ratio of around 15%. The 2016 return of CASA’s 25% stake in its regional mutual bank owners helped simplify its capital structure.
European mutual groups’ somewhat secondary attention to profit sometimes rightly gives them a reputation for a lack of efficiency. This is not the case at Crédit Agricole, whose group cost-to-income ratio is close to 60% and well below other French banks. Greater efficiency than other French groups is not just thanks to its greater scale in retail but also to competition on performance between its regional banks and to digitalization, including the unification of IT systems.
Under CASA chief executive Philippe Brassac, Crédit Agricole has succeeded on the basis of a clearer conception of the regional banks as the group’s powerhouse and the underpinning for businesses such as asset management that can then use those advantages of scale both in France and beyond. That is partly a reflection of Brassac’s strongly mutualist leadership ideals, as well as the unification of the boards of the regional banks’ federation and CASA under a single chairman, Dominique Lefèbvre.
Even outside France the model is working exceptionally well. In Italy – which it regards as a second home market – it is one of the few lenders to have shown that the unattractiveness of Italy’s banking market is a myth, earning €550 million in net income last year despite its relatively small size. Now it is bulking up there, although gradually, with the acquisition of three small savings banks in late 2017.
As Crédit Agricole’s Italian expansion might show, French banks are doing well today through ambition that is steadfast but careful. It is also true in investment banking. BNP Paribas, France’s best investment bank, looks set to be an even stronger contender across western Europe in future, after setting its corporate banking sights more decisively on the UK, Germany and the Nordics over the last year.
BNP Paribas’ home market is nevertheless one of the most competitive in European investment banking, thanks to the Parisian bases of Lazard and Rothschild and the determination of other big French banks – especially Société Générale – to maintain their capabilities in the sector.
Over the last year, BNP Paribas has made important hires across Europe in equity capital markets, financial sponsors and for its UK and Scandinavian corporate businesses. The fact that high-profile bankers are throwing in their lot with BNP Paribas shows the bank’s ability to inspire faith in its strategy.
This does not appear hubristic. Although it does not split out figures for its advisory and primary markets businesses within corporate and institutional banking, its CIB unit nevertheless is an engine for group profit, with return on equity in the high teens. Its markets businesses, including equities, have held up better than some rivals over the last year. A new partnership with New York’s electronic market maker, GTS, boosted its fixed income offering.
In France, according to Dealogic, it is the only bank to have a top-three position across the French league tables for debt and equity capital markets and M&A. There was evidence in France of the momentum of its advisory push, with deals such as Vivendi’s €3.9 billion acquisition of 60% of Havas from the Bolloré group and Siemens’ €7.4 billion acquisition of the mobility business of France’s Alstom.
In French capital markets, BNP Paribas’s strengths could be seen in deals such as Danone’s €1.25 billion debut hybrid bond, which achieved a coupon of just 1.75%, and in French group Orange’s £900 million combined offering of stock and exchangeable bonds into BT Group shares. It was global coordinator on both.
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GermanyBest bank: Commerzbank
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The travails of one particularly large German lender over the last year have continued to underline the challenges facing the German banking industry. But there are bright spots, notably in serving the local and international needs of Mittelstand clients and in the ability to provide more efficient and better service to retail clients through online channels.
Germany’s best bank, Commerzbank, is focusing on both of these opportunities. As it likes to repeat often, Commerzbank finances about 30% of German foreign trade. It is equally proud of its Comdirect subsidiary, which completed a merger with Onvista (previously part of France’s Boursorama) in April last year.
Commerzbank’s private and small business customer base grew by around 500,000 in 2017, while new mortgage lending also accelerated, reaching €15 billion. It also comfortably beat its corporate customer acquisition target of 3,500. Partly as a result of this, its revenues excluding exceptional items rose during 2017 and the first quarter of 2018. Its non-core ship finance book fell from €4.8 billion to €2.6 billion in 2017. Its CET1 ratio rose from 12.5% to 13.3% during the awards period.
Much of the strategy Commerzbank announced in late 2016 revolves around efforts to digitalize more rapidly than its competitors. It is consequently investing €700 million a year in digitalization and IT, and is involved in numerous initiatives, particularly around blockchain and trade finance, including the Marco Polo network and the Batavia platform with IBM.
Germany’s best investment bank, Berenberg, is by no means the country’s biggest, but its international growth is drawing attention.
This is a very different model to its bigger rivals – partly through necessity because it does not have the balance sheet bulk of Deutsche Bank. Its fixed income business is small.
Focused instead on equities, Berenberg considers its advantages lie in its ability to gain business on the basis of its quality – better ideas and insights on the research side, better advice to companies looking to list or raise capital in the equity markets. Crucially, the lack of capital consumption boosts its returns. Overall, the idea is for a return to the model of the pre-1990s independent merchant banks, before they were swallowed up by the bulge-bracket firms.
Berenberg is confident that its investment in research means that the recast Markets in Financial Instruments Directive will play to its advantages, forcing the buy side to be pickier.
Its research team has continued to grow, reaching 122 analysts in 2017, while the number of stocks under coverage also rose to 770.
In part thanks to its European growth, Berenberg did a record 51 equity capital markets deals in 2017, more than double the number of the previous year, in addition to several convertible bonds. In the first three months of 2018 that success continued with 17 deals.
It has certainly come a long way from the pure German firm of a decade ago; today it has one of the largest equity sales teams in Europe, with around 800 institutional clients.
Yet Berenberg is not neglecting its roots, and the German-speaking world remains core to its equity capital markets business, as evidenced in deals such as the €286 million IPO of food delivery firm Hello Fresh, a firm for which it has led follow-on placements in 2018 (again as global coordinator). It was also sole global coordinator of micro-battery maker Varta’s €233 million IPO – succeeding after rival investment banks had to pull the deal in 2016.
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GreeceBest bank: Alpha Bank
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The last year has offered more reason to be hopeful about the future of Greek banks. They have sold non-core assets including international banking operations, local real estate and non-performing loan portfolios, and launched the country’s first bad-debt servicing companies. All four of the big Greek banks staged a return to the international debt capital markets, issuing covered bonds between last autumn and early 2018.
The work to clean up balance sheets, of course, remains immense and the stakes are still high, as the most recent ECB stress test underlined – a capital depletion of €15.5 billion were the economy to shrink this year and next. Alpha Bank performed by far the best in that exercise, with a CET1 ratio close to 10% in the adverse scenario compared with around 6% or 7% for the other three. It was one of the two to post a profit in 2017 and its core pre-provision profit (€1.2 billion) was by far the biggest.
Already an outlier in terms of its efficiency, with a cost-to-income ratio of less than 50%, Alpha Bank reduced costs by a further 1% during the awards period. Its deposit base grew by €2.8 billion, helping its loan-to-deposit ratio fall from 134% in March 2017 to 116% a year later. All very pleasing for long-standing chief executive Demetrios Mantzounis.
Alpha Bank reduced its non-performing loan book by a further €3.1 billion during the year, exceeding its targets to clean up its balance sheet. It closed four NPL transactions totalling €1.3 billion and is preparing a further two, including an €800 million secured SME portfolio. In May, the Bank of Greece approved the Pillarstone non-performing exposures platform, a joint venture with KKR Credit, Eurobank and the EBRD.
Alpha Bank is not just focusing on resolving legacy problems, however. It is also developing its digital and business franchises, with SME funding agreements with the European Investment Fund, and launching contactless payments by mobile phone, for example.
Citi has won Greece’s best investment bank award for the last two years and for good reason. It continues to be the strongest of the international banks operating in the country by some distance, and it dominates the bigger deals.
Yet clients will always want investment banks with a strong local presence that can excel in more idiosyncratic, smaller situations. Greece’s best investment bank this year, Axia – whose founding partner and group managing director Antonios Achilleoudis is based in Athens – is such a firm.
Achilleoudis’s firm has stepped up in places like Cyprus, Greece and Portugal, even as the international houses have turned away from southern Europe’s riskier markets, no longer covering even key bank stocks. Axia, on the other hand, continued to grow headcount during the awards period, opening an office in Italy and expanding its coverage of Greek stocks to 85% of daily trading volume in Athens.
On the primary markets side, Axia had a particularly strong year in Greece and has been central to the Greek bank restructuring and NPL story. Its deals include acting as global coordinator in the €178 million accelerated bookbuild of 20% of Grivalia Properties by Eurobank and advising on M&G’s €60 million investment in Grivalia Hospitality. It also acted as financial adviser on private equity transactions involving Lamda Development.
Axia advised local financial technology firm Qualco on a capital raising involving an international asset management firm, in relation to Qualco’s growth plan for NPL servicing. And it was adviser on some of the largest corporate restructurings during the period, notably Jetoil’s sale to Cetracore and the injection of new money into Famar from the Pillarstone platform. Finally, it is working on a capital raising by Praxia Bank as part of the effort to boost its potential as a challenger bank to the big four.
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IcelandBest bank: Islandsbanki
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Iceland’s banks are heading back to private-sector ownership looking very different to before the financial crisis. As elsewhere in the world, leadership in digitalization looks like the best way to differentiate oneself from the competition.
Islandsbanki has not ignored the digital challenge – whether that involves overhauling its core banking system or collaborating with financial technology companies. Its payments app, Kass, launched in collaboration with local digital wallet firm Memento, now has more users who do not have a primary banking relationship with Islandsbanki. A collaboration with another fintech firm, Meniga, is behind its customer loyalty programme, Frida, while its latest app, Kreditkort, allows real-time monitoring of credit card usage.
But Islandsbanki is staying true to its core role of lending to households and businesses. It financed more house purchases than ever before in 2017 and increased its market share in SMEs, while its asset financing firm, Ergo, had a particularly strong year. Its corporate lending also grew at a healthy clip, while its bad debt ratio fell and profit before tax grew to IKr15 billion ($137 million).
Islandsbanki is still at the forefront of international capital markets issuance by Icelandic banks, in part thanks to ratings from both Fitch and S&P, highlighted by the SKr750 million 10-year tier-2 bond it issued in November.
The planned IPO of Arion Bank by owner Kaupthing looked set to be the most important Icelandic investment banking deal for years as this awards period came to a close. However, Arion had plenty of client deals over the last year about which it can boast, including the IPO of Klappir Green Solutions on Nasdaq Iceland First North in September and its advisory work on the IKr37.9 billion acquisition of retail store operator Festi by N1 and Fast-1 subsidiaries by Reginn.
Arion Bank’s bond deals during the period include an IKr4 billion deal for Reitir Real Estate Company and bonds for Gardabaer Municipality and Reykjaviik Energy.
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IrelandBest bank: Allied Irish Banks
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Although not always for good reasons, Irish banks remained at the centre of national attention over the last year. It was an eventful period that saw the exit of the chief executive who had steered Bank of Ireland through the eurozone crisis, Richie Boucher. He was succeeded by former HSBC banker Francesca McDonagh in the autumn.
The main landmark, however, was the IPO of Allied Irish Banks in June last year, raising €3 billion for the government, which sold its stake down to 75%. It was a step for which AIB and its chief executive Bernard Byrne had prepared long and hard, notably in terms of its efficiency. AIB’s cost-to-income ratio in 2017 seemed on track for its medium-term target of below 50%, coming in at 53% for the year, or 48% excluding exceptional items.
The reward for all AIB’s years of cost control is a share valuation above book value. In 2017, meanwhile, net interest income and fees were on the up, with operating profit growing 20% to €1.5 billion. It also continued to work on reducing its bad debt, with a deal to sell a €1.1 billion portfolio to a Cerberus-led consortium struck just outside the awards period. Common equity tier-1 rose from 16.5% to 17.5% in the year to the end of March.
Setting its prioritization of digital banking in stone, AIB signed a lease on a new building outside Dublin to act as its hub for developing digital products and services. It also launched a €3 million investment programme for technology startups alongside venture capital fund Frontline, later announcing an initiative to encourage the use of that funding by female entrepreneurs in particular.
The tracker mortgage scandal, where customers were wrongly switched to fixed-rate deals, tarred all of the big Irish banks with the same brush. However, AIB has long recognized the importance of showing its caring side – and understandably so, given its efficiency drive, state backing and a larger share in retail.
It made a point of gathering new funding for SMEs loans in a partnership with the Strategic Banking Corporation of Ireland to help firms hit by Brexit.
One positive result of Brexit, at least for Dublin, is the shift by international banks of their European headquarters to the city from London. However, the international banks which really do justice to the Irish market in terms of their deal coverage are few. Citi, last year’s winner, is one, but Ireland’s best investment bank this year, Davy Group, is a home-grown champion. Indeed, it was the only local global coordinator on AIB’s IPO – by far the most important Irish deal in the awards period.
Davy’s other deals include acting as global coordinator on the €667 million IPO in Dublin and London of Glenveagh Properties and as financial adviser and bookrunner to Greencoat Renewables on its €270 million IPO and admission to Ireland’s Enterprise Securities Market and the equivalent market in London.
Its work as sponsor on the restructuring and insertion of a new holding company for Bank of Ireland saw it act as bookrunner on the bank’s first holdco bond in dollars and sterling in September.
The deals continued to flow in 2018, with transactions including the completion of Total Produce’s takeover of US rival Dole and a related equity placing.
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ItalyBest bank: Intesa Sanpaolo
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Italy’s biggest bank by assets, UniCredit, had a commendable if dull 12 months in comparison with the momentous turnaround in sentiment that culminated in its €13 billion rights issue in February 2017. It did make progress on costs. In early 2018 it completed the €17 billion non-performing loan reduction project, Fino, having completed the sale of Pioneer to Amundi in mid 2017. But its 2019 transformation programme was incomplete.
Meanwhile, for the bank that already had the biggest share of the Italian market, the €1 acquisition of €26 billion in healthy assets and liabilities from two mid-tier banks in Italy’s rich northeast made it a much more newsworthy summer of 2017 for Carlo Messina, chief executive of Intesa Sanpaolo, Italy’s best bank.
The Veneto takeover was attractive even by the standards set only a few weeks earlier by Santander’s €1 acquisition of Banco Popular (a deal that nevertheless came burdened with enough non-performing exposures to justify a €7 billion capital raising).
At the same time, the takeover allowed Messina to look like a white knight, having helped avert a forced wind-down of the two banks.
Despite the progress it has made, UniCredit’s return on equity in 2017 was still around two percentage points below Intesa Sanpaolo’s 9%. A cost-to-income ratio of 55% in 2017, with the promise of continued cost reductions and high dividend payouts in its new three-year strategy, are among the reasons why the latter’s market valuation is still much higher than that of UniCredit. Investment in a digital transformation and a renewed focus on wealth management make sense. Investors like the fee-earning prospects of its wealth management push.
Although just outside the awards period, Intesa reached an agreement with Swedish credit management firm Intrum in early April that included the disposal and securitization of a €10.8 billion NPL portfolio.
Largely thanks to a business that is focused away from commercial banking, one local financial firm that has emerged relatively unscathed from the Italian non-performing loan crisis is Mediobanca, Italy’s best investment bank.
Mediobanca remains at the heart of corporate Italy. While chief executive Alberto Nagel is replacing non-financial equity stakes with a bigger presence in private banking, it is still hard to find big Italian equity and M&A deals that do not involve Mediobanca.
Crucially, Nagel has helped make sure Mediobanca is instrumental to the closer integration of corporate Italy with the rest of Europe, by bolstering its presence in London, Paris and Madrid. He hired Francisco Bachiller from Morgan Stanley as Mediobanca’s head of Spain and co-head of corporate and investment banking.
At Mediobanca, Bachiller was a central figure in the €35 billion acquisition of Spanish toll road operator Abertis by Italy’s Atlantia and Spain’s ACS, which was by far the largest Italian deal agreed during the awards period.
As France becomes a more important acquirer of Italian firms, Mediobanca has again been at the heart of the action, advising Italy’s Luxotica on the eyewear firm’s €50 billion merger with Essilor and Amundi in its €3.5 billion acquisition of Pioneer.
And if Mediobanca has sailed through the NPL crisis, it has not been irrelevant to it. It is advising Intrum on its NPL partnership with Intesa Sanpaolo and was sole global coordinator on the €700 million rights issue of Credito Valtellinese – another vital step in the sector’s restructuring.
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LuxembourgBest bank: BGL BNP Paribas |
Perhaps the biggest single event in Luxembourg’s bank sector in 2017 was the September purchase of 90% of Banque Internationale à Luxembourg (BIL) by Chinese investment company Legend Holdings, owner of computer manufacturer Lenovo, for €1.5 billion. It was a landmark for Chinese investment in European banking and for Luxembourg’s status as a hub for that trend. It saw the exit of the Qatari royal family’s investment vehicle, Precision Capital, which bought BIL from Dexia for €730 million in 2012.
Few other Luxembourg banks, however, can aspire to the size of BGL BNP Paribas, whose net income remained by far the biggest in the sector in 2017 at €366 million. Despite its bulk, the French-owned lender posted good growth in its balance sheet, particularly on the deposit side, with average deposits growing 15% in Luxembourg retail and corporate banking, while average loan outstandings grew by 7%. There were also healthy increases in its leasing business and wealth management, the latter reporting a 9% rise in assets under management.
The beginning of the awards period in April 2017 saw the launch of BGL’s microfinance institution alongside the European Investment Bank. The end of the period saw BGL strengthen its local private banking activities with the acquisition of ABN Amro’s Luxembourg bank and local life insurance arm.
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NetherlandsBest bank: ABN Amro
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Despite its banking sector’s high profitability relative to most of the eurozone and its reputation for digital sophistication, the Netherlands is not an easy country for bankers. This March, for example, ING had to back down after public uproar at the board’s ill-judged attempt to give chief executive Ralph Hamers a 50% pay rise. Stringent cost cutting in its Dutch network did little to ingratiate ING with local political interests. ING has also seen its share price suffer more than most recently, over new investor doubt about its ability to contain costs.
Nor does the country’s best bank, ABN Amro, enjoy lighter public scrutiny over its conduct, especially given that it is still majority state-owned. Its chief executive, Kees van Dijkhuizen, gets paid less than half the amount of Hamers. On the other hand, ABN Amro is more profitable than ING and was more successful last year in improving its efficiency, even as it retains a strong local position in investment banking.
Back office rationalization, including the private bank and markets division, should allow further efficiency gains at ABN Amro. It has already moved some functions to cloud storage to help reduce its IT bill – perhaps offering a chance to catch up with ING in digitalization.
A reduction in the cost-to-income ratio to 60% helped ABN Amro increase return on equity to 14.5% in 2017. It has also managed to maintain its share of new mortgages, despite the rise of pension and insurance-funded non-bank lenders in the Netherlands. Importantly, the improvement on costs has helped push up its share price since the 2015 IPO, allowing the government drip feed further stakes into the market, most recently in September.
The departure in February of chairman Olga Zoutendijk, after what the bank said was an internal debate over her leadership style, was not a pleasant experience. (The former chairman of Zurich insurance group, Tom de Swaan, was later named as Zoutendijk’s replacement). Yet the year did hold better news for ABN Amro, particularly on the digital front, with a range of launches and initiatives.
In September, ABN Amro launched New10, offering SME loans within 15 minutes by using payments data. Then it increased its stake in the Swedish personal financial technology firm, Tink, in October. In January, it launched Franx, offering online foreign exchange transactions and payments; it participated in the first agricultural commodity trade using blockchain; and its payment app Tikkie reached two million users, having been launched on the high street in December.
This year, Bank of America Merrill Lynch deserves recognition as the country’s best investment bank, after two years of consecutive victories by the preeminent local firm, ABN Amro, which continues to be strong in the Netherlands.
BAML was exclusive financial adviser to Royal Philips on its €1.9 billion acquisition of US medical devices producer Spectranetics, leading a €1 billion bridge loan for the acquisition and was global coordinator on the associated bond financing. It was also financial adviser to Delta Lloyd on its public offer from fellow Dutch insurer NN Group and adviser to NPM Capital on the sale of Dutch logistics firm Vanderlande to Toyota Industries.
In equity capital markets, BAML was joint global coordinator on the €648 million IPO of VolkerWessels. State financial holding company NLFI awarded BAML another repeat mandate in the €1.5 billion accelerated bookbuild in shares in ABN Amro in September.
On the credit side, BAML’s Dutch deals included a dual-currency tier-2 capital bond for ING; a return to the bond markets for the first time in almost a decade by PostNL; and the first bond deal from Ahold Delhaize since the completion of its formative merger in 2016.
It was also instrumental in leveraged finance, including the €1.4 billion buyout of car-park operator Q-Park by KKR in July 2017.
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NorwayBest bank: DNB
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Despite a slowdown in Oslo’s property market, Norway has continued to recover from the oil price slump, allowing a rebound in profits at DNB, Norway’s best bank.
While loan-loss provisions dropped, a shift away from corporate lending to cyclical industries saw it grow share and volume in home loans, while also increasing lending to SMEs. Return on equity rose to 10.8% in 2017, and in the first quarter of 2018 its profit rose to NKr5.6 billion ($688 million), up 25% year on year.
DNB’s cost-to-income ratio at 44% is partly the result of rapid digital development in a country that enjoys one of the best internet infrastructures in the world. It has closed about two thirds of its branches since 2013 and today only has a handful even in Oslo. But its success is not just from closing branches.
DNB launched its free peer-to-peer payments platform, Vipps, less than three years ago. Now the majority of young people use it, making Vipps a Norwegian rival to Facebook in terms of the number of users. DNB spun off Vipps into a separate company in 2017, and most other Norwegian banks now also distribute the product.
While it is also putting up a good fight over the border in Sweden, domestic leadership makes ABG Sundal Collier Norway’s best investment bank.
According to Dealogic, ABG Sundal Collier is the only firm with a top-three position in the Norwegian M&A and equity capital markets volume league tables. It also had a higher number of deals than any other bank in ECM and M&A. It can also boast activity in bonds, particularly private placements, and not just in Norway.
ABG Sundal Collier’s key deals over the last year included acting as global coordinator on the IPOs of Komplett Bank (NKr1 billion) and IT firm EVRY (NKr4.4 billion). In M&A, it advised on the NKr3.8 billion acquisition of local industrial group Glamox by funds advised by Triton. It also advised firms going through restructuring processes such as Volstad Maritime and Farstad Shipping, the latter included a merger with Deep Sea Supply.
Financially, ABG Sundal Collier appears to be doing well, with revenues growing to NKr1.3 billion in 2017, net income rising to NKr240 million and return on equity at 29%.
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PortugalBest bank: Banco BPI
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Progress in reducing the budget deficit earned Portugal a return to an investment-grade rating by Standard & Poor’s in September. The country’s banking sector is also going through a fundamental restructuring, including the increased presence of Spanish and Chinese groups.
Banks mulling acquisitions of full-service banks in another eurozone country should note what has already been achieved at Banco BPI, Portugal’s best bank, after its acquisition by Spain’s CaixaBank in February 2017.
The BPI merger can already boast having achieved its targeted synergies of €122 million. The Portuguese business achieved its best result for a decade in 2017, with earnings up 21% to €191 million. Already an outlier in the quality of its assets, BPI’s non-performing exposures fell from 6.6% to 5.1%. Crucially, it also cut overhead costs, including personnel, by 7%. Unrelated to the sovereign action, Standard & Poor’s upgraded BPI in December thanks to its standalone improvement and parent support.
Under new chief executive Pablo Forero, BPI is working towards further synergies with the group through the sales to CaixaBank in November of its pension management and open-ended investment fund businesses. BPI has also sold its life insurance management business and its trading, research and corporate-finance businesses to CaixaBank. The Portuguese bank now distributes CaixaBank group products in asset management, insurance and pensions, in addition to products from Allianz Portugal, which is 35% owned by BPI.
In December 2017, BPI sold its credit and debit card issuing activities to CaixaBank Payments. Comercia Global Payments (49% owned by CaixaBank) is acquiring BPI’s point-of-sale terminal activities. Separately, BPI and its pension fund have sold their indirect shareholding in Portugal’s biggest beer company to the local Violas group, resulting in a gain of €60 million.
Far from shying away from risk under its new owner, BPI’s mortgage loan origination increased by 19% in 2017, loans to small businesses grew 10% year on year and loans to bigger companies rose by 5%. Finally, in another example of the possible local benefits of the merger, the CaixaBank Foundation expects to increase its annual budget for social and cultural activities in Portugal to €50 million over the next five years. Its 2017 social contributions included help to re-house people affected by wildfires.
After many years when CaixaBI seemed unsurpassable, this year Portugal’s best investment bank is Millennium. Part of Millennium BCP, the top-three Portuguese commercial bank now 30% owned by China’s Fosun, Millennium was involved in a number of advisory mandates during the awards period and vied with CaixaBI in Dealogic’s Portugal ranking of debt capital markets bookrunners.
Millennium’s bond deals included issues for healthcare firm Saudaçor, the Autonomous Regions of the Azores and Madeira, and cement firm Secil. In addition, there were repeat mandates by regular bond issuers such as road management firm Brisa and electricity utility EDP, as well as numerous sovereign mandates as global coordinator.
Millennium was involved as financial adviser in various transactions for EDP, including the €532 million sale of EDP Gas to REN, concluded in October. This was in addition to work such as the Oxy Capital-backed management buyout of car parts firm Sunviauto and the €250 million takeover of glassmaker Santos Barosa Vidros by Spain’s Vidrala.
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SpainBest bank: Banco Santander
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The last year has seen Spain back at the centre of the global strategy for SMEs and digital banking at Banco Santander. Its acquisition of Banco Popular gave it the biggest market share in Spanish credit, with particular strengths in SMEs. OpenBank’s relaunch saw the birth in Spain of a cloud-based platform – a key part of Santander’s international development of its digital offering and core banking system.
In addition, the year also brought the launch in Spain of a Smart 123 account for millennials and the Zero account, which is entirely digital and has no fees.
In SMEs, the Popular acquisition gives Santander a market share of 25% in the segment in Spain. Other developments in its Spanish SMEs franchise over the period included the launch of its Confirming app to facilitate treasury management and its Bansacar car rental app.
For Santander’s executive chair Ana Botín and chief executive José Ántonio Álvarez, 2017 was a good year, finally, as group return on tangible equity (ROTE) rose 70 basis points to almost 12%. The good performance continued in the first quarter of 2018, when ROTE reached 12.4%, with fully loaded CET1 also rising in line with its target to 11% over the year to the end of March.
In Spain, the improvement was even more marked, with higher fee income and cost control leading attributable profit to reach €1.2 billion in 2017, up 46%, while the NPL ratio fell by 70bp to 4.72%, with rapid action to offload Popular’s non-performing exposures following a €7.1 billion rights issue in July.
In investment banking it was another year when financial institutions dominated much of the deal flow in Spain. Citi was at the forefront of almost all the most important bank-related deals – notably advising Santander on its acquisition of Popular. It was also active outside that sector, advising toll-road operator Abertis on tender offers worth €35 billion from Atlantia and Hochtief, for example.
In the year that saw the spread of senior non-preferred bonds in Spain, Citi was joint bookrunner on both the BBVA and CaixaBank deals in August and global coordinator on the inaugural additional tier-1 bond from Bankia.
In equity, it co-underwrote Liberbank’s capital raising and was global coordinator on Santander’s rights issue around the Popular takeover.
For non-financial corporates, Citi was global coordinator on the €667 million IPO of Aedas Homes. It advised on CVC’s €3.8 billion acquisition of a 20% stake in Gas Natural from Repsol, among other financial sponsor-related deals. In green bonds, its work included being sole global coordinator in the €700 million issue by Iberdrola in March.
Finally, Citi was bookrunner on landmark sovereign bonds from Spain, including a €10 billion issue in January and €6 billion 30-year issue in February.
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SwedenBest bank: Swedbank
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Swedish banks are not quite the darlings of investors they were a couple of years ago. The rest of Europe’s banking sector has taken further steps to restructure, while a more advanced economic cycle in Sweden has brought a slowdown in the local housing market, particularly in Stockholm. At the same time, new Basel III risk-weighting standardization will cause relatively high capital costs for Swedish banks.
Sweden’s best bank, Swedbank, has been among the hardest hit by investor fears about the slowing housing market and by the local regulator’s recent lowering of risk-weighting floors. Nevertheless, the property market slowdown has so far proved relatively measured. Swedbank has made sure it is well placed to deal with the challenges, in particular thanks to its exceptional efficiency and strong capital. Indeed, analysts expect Swedbank to remain the most profitable bank in Sweden this year and next.
Swedbank’s return on equity in 2017 remained above 15%, while its cost-to-income ratio remained below 40%. Its CET1 ratio reached 24.8% at the end of the awards period, while lending and deposits also grew. Its digital push included the acquisition of payments firm PayEx and an investment in financial technology company Mina Tjänster, whose app makes it easier for customers to manage subscriptions and view personal finances.
Importantly, Swedbank recognizes the challenge of maintaining high customer satisfaction as well as capital and profit, and is making sure its branches help clients familiarize themselves with the mobile bank’s functionality, for example.
A benign stage in the economic cycle, a reputation for innovation and good governance, and widespread private equity involvement have all allowed Sweden to punch above its weight in IPOs recently. BNP Paribas’ choice of Scandinavia last year as a focus for its European growth shows the region’s attractiveness for international wholesale banks. Meanwhile, big regional lenders like Nordea, as well as regional independents, such as ABG Sundal Collier, are also vying for market share.
While it continues to win business elsewhere in Scandinavia, clients in Sweden still seem to appreciate the local heritage of Carnegie, Sweden’s best investment bank. Carnegie, led by chief executive Björn Jansson, remained top of the Swedish equity capital markets league table during the awards period, according to Dealogic. It was joint global coordinator on the highly successful SKr4 billion ($449 million) IPO of climate controls group Munters, acquired by Nordic Capital in 2010, for example. It was also global coordinator for the SKr1.9 billion IPO of online fashion retailer Boozt, another private equity-backed deal.
Another good example of its work was the acquisition of Germany’s Goodgame Studios for €270 million by Swedish games developer and publisher Stillfront; Carnegie’s advice included a complex equity and debt financing package. Elsewhere, it advised NNB Intressenter (controlled by Nordic Capital and Finland’s Sampo) on its SKr6.7 billion public offer for consumer finance group Nordax. In addition to the Stillfront financing, another example of its involvement in more complex bond deals was its role as financial adviser and bookrunner on Swedish steel firm Ovako’s €310 million bond, which included a special redemption feature.
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SwitzerlandBest bank: Credit Suisse
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After half a decade of straight victories for UBS, this year the firm with the momentum is Credit Suisse, Switzerland’s best bank. Credit Suisse’s home market has been crucial to the bank’s wider recovery, thanks above all to a marked improvement in its efficiency. Yet its performance in Switzerland in terms of revenues and inflows suggests the cost push has not been to the detriment of its franchise.
Overall, it seems the strategy of chief executive Tidjane Thiam to separate Switzerland from the rest of the group in 2015 under Thomas Gottstein, chief executive of the Swiss universal bank, is working – and makes sense – given the very different demands of its more mature Swiss bank compared with its faster-growing markets, especially in Asia.
A Swiss universal bank cost-to-income ratio of 64% in 2017 and 58% in the first quarter of 2018, down from almost 70% in 2015, shows the unit is heading in the right direction in terms of sustainable profitability. The unit also posted an encouraging rise in revenues in 2017 and again in the first quarter of 2018.
The Swiss universal bank’s performance in terms of private banking net new assets was even more impressive, up from SFr100 million ($1.01 million) in 2016 to SFr4.7 billion in 2017 and rising again by SFr2.7 billion in the first quarter of 2018. Its assets under management grew to SFr558 billion in the year to the end of March. Meanwhile, international wealth management (which includes its Swiss asset management business) also grew assets by 8% to SFr761 billion in that period.
In terms of products, Credit Suisse continued to develop its digital offerings for private and corporate clients in Switzerland. Among other initiatives, it launched Viva Kids, a digital piggy bank that allows children to set savings goals and includes a parents’ app to manage pocket money, a cash card and a financial literacy platform.
Last year, Euromoney recognized the success of UBS’s work to build market share in its home market in investment banking, advising and arranging the financing for Lonza’s acquisition of Capsugel and advising Syngenta on the biggest-ever Swiss takeover, by ChemChina. This year, however, the firm that claims the prize is Credit Suisse, Switzerland’s best investment bank.
In M&A, Credit Suisse advised on a $1.7 billion coal mine sale by Rio Tinto to Glencore; on the €1.9 billion acquisition of Interroute by GTT, in cloud computing; and on the $2 billion cash offer for UK capital markets player Fidessa by Temenos. It also advised Saudi chemicals firm Sabic on its SFr2.4 billion acquisition of a 24.99% stake in Clariant; Ferrero on its $2.4 billion acquisition of Nestle’s US confectionary business; and Zurich on its A$2.9 billion ($2 billion) acquisition of ANZ’s life insurance business.
In equity capital markets, Credit Suisse was joint global coordinator for the SFr1.9 billion IPO of Galenica Santé; bookrunner on a rare Swiss convertible bond from Swiss Prime Site; and global coordinator on three accelerated bookbuilds for vacuum components supplier VAT, allowing Capvis and Partners Group to exit.
In debt, Credit Suisse’s work included ABB’s $1.5 billion senior bond offering; Multilease’s ABS funding platform for a SFr660 million Swiss auto book at a 0% coupon; and Geneva’s inaugural green bond, a SFr620 million 10- and 14-year deal.
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United KingdomBest bank: Lloyds Banking Group
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In the final Euromoney awards before the UK leaves the EU, it is anyone’s guess what state the British economy will be in this time next year. What is clear is that most analysts still expect Lloyds Banking Group, the UK’s best bank, to remain the most profitable of the country’s big four lenders.
The consensus is for Lloyds’ return on tangible equity to remain the highest, despite the recovery of RBS, which in a long-awaited turnaround could soon be the second most profitable, according to Berenberg. This is perhaps because of RBS’ overwhelming focus – like Lloyds – on the UK.
In 2017, Lloyds’ ROTE of around 14% compared with around 10% for HSBC, the next most profitable UK bank, according to UBS. First-quarter 2018 results would seem to suggest the majority of analysts are right to think this is sustainable. Lloyds announced a strong start to 2018 with the net interest margin up, revenues rising more than expenses to bring the cost-to-income ratio down to 48%, and a CET1 ratio of 14.1%.
Good financial results did not prevent embarrassments for chief executive António Horta Osório at its most recent annual general meeting, including a recommendation by proxy voting firm ISS that shareholders reject his proposed £6.4 million pay packet. However, by the standards of UK bank chief executives, this was all relatively easy to brush off.
Despite even more payment protection insurance claims dragging down its 2017 statutory profit, Lloyds has a lot of good things to talk about in corporate responsibility this year – particularly in terms of its efforts to be an equal-opportunity employer. Meanwhile, plans announced in early 2018 to invest more in its digital transformation will build on its position as one of the most advanced banks in Europe in this area, according to a recent ranking by Autonomous Research.
What differentiates Barclays, the UK’s best investment bank, from its competitors in its home market is its strong hold on the large UK corporate deals combined with a business that goes deep into the British mid- and small-cap segment.
It has also invested in this business, which was evident in the rise not just in its volume of UK deals but also in the number of transactions, particularly in bonds (there were more than 200 during the period, according to Dealogic).
The business ranges from British American Tobacco’s $17.25 billion eight-tranche bond issue for its Reynolds American acquisition, right down to private placements as small as a £15 million for Lord Wandsworth College.
Innovation was also in evidence, as for example in the green US private placement for Thames Water. Its high-yield deals included a £425 million bond for Miller Homes (a debut issue backing the leverage buyout of Bridgepoint), a £360 million deal for PureGym and a £730 million dual-tranche bond offering for Center Parcs.
Barclays’ investment in its UK equities business saw it make over 50 hires in sales, trading and research.
An expanded mid- and small-cap offering is shown in the scope of its equity research – of the 241 stocks it covers, two thirds are mid-caps. The firm is a deserving winner of this year’s UK best investment bank.
It almost doubled its share of the equity capital markets bookrunner league table, according to Dealogic. It was global coordinator on Cineworld’s £1.7 billion rights issue and Tullow Oil’s £607 million rights issue. It led IPOs in the £150 million to £300 million range, including those for Alfa Financial Software, Sabre Insurance, Charter Court and Global Ports.
It led rights issues of a similar scale for Equiniti, Provident Financial, construction company Galliford Try, infrastructure firm John Laing and outsourcing firm Capita.
In M&A, Barclays advised CME Group on the acquisition of NEX Group; JD Sports on its $558 million acquisition of The Finish Line; and events group Informa on its £3.9 billion acquisition of UBM.
