2010 Regional awards for excellence: Central and Eastern Europe
The past year has been extremely volatile in central and eastern European markets, with sentiment ebbing and flowing dramatically, testing the mettle of all the banks in the regions. The past few months have begun to provide some welcome clarity, however, with the economic downturn in the region generally proving to have been sharp but short-lived. As a result most market players are now seeking to reap the long-term rewards of central and eastern Europe’s economic potential as a low-cost, high-quality base for manufacturers and service providers looking to serve western European and Asian markets.
The bank best suited to exploiting those undimmed economic prospects is France’s Société Générale, which over the past decade has slowly but surely built up an impressive range of operations in the region to rival those of competitors such as Raiffeisen International. As well as having a presence in important markets such as Russia, where it is now the largest foreign banking group and has assumed systemically important status, SocGen has small but highly profitable operations in frontier markets such as Belarus, Georgia, the former Yugoslav Republic of Macedonia and Moldova. In the new European Union member states such as the Czech Republic and Romania its Komercni banka and BRD subsidiaries are brand-name banks that rank among the most profitable in their class.
Overall, with subsidiaries in more than 18 central and eastern European countries that service more than 11 million customers, SocGen can boast a pan-regional network that is able to serve the needs of retail and corporate clients. As a universal bank, SocGen is also reaping the benefits of those retail and corporate banking franchises to generate lucrative fee income in investment banking. It is therefore well positioned to become a prime beneficiary of the upturn in the economic fortunes in the region, whether in important financial centres such as Istanbul, Moscow and Kiev, or niche destinations such as Tbilisi, Minsk or Skopje.
In investment banking Credit Suisse was the most impressive performer. Although it was pipped to the post for the best debt, equity and M&A house awards, none of its rivals can claim to be able to match it for across-the-board performance. Among the key transactions underpinning the award are M&A advisory deals such as the $5.8 billion acquisition of Ukrainian telco KyivStar by Russia’s VimpelCom, the biggest announced M&A deal in central and eastern Europe in 2009. It created an enlarged group worth $12.6 billion, enabling the merged entity to drive industry consolidation in the Russia/CIS region. Credit Suisse also acted as global coordinator and joint bookrunner on the landmark $2.2 billion Rusal cross-border IPO, which was the first ever Russian listing in Hong Kong and the largest Russian metals and mining IPO. Although the deal struggled in the secondary markets, Credit Suisse (along with BNP Paribas and Bank of America Merrill Lynch) deserve credit for getting it done at all, given the strict listing rules enforced by the Hong Kong Stock Exchange and the controversy surrounding Rusal and its biggest shareholder, Oleg Deripaska.
Elsewhere, Credit Suisse demonstrated its strong links with key regional governments such as Poland where it helped sell a 16.05% stake in power company Enea in February, just one of a number of mandates the firm has picked up in the Polish market. It’s also no slouch on the debt front, boasting an impressive portfolio of transactions. Stand-out deals include a complex and innovative liability management in the $1.6 billion consent solicitation and exchange transaction on behalf of Ukrainian gas company Naftogaz, in the first directly issued foreign-currency corporate bond in Ukraine.
The firm also lead managed deals for Russian corporates such as Gazprom and Alliance Oil as well as running transactions for Russian banks such as AK Bars, Tatfondbank and Bank of Moscow. Elsewhere, it worked on a senior secured notes issue for Hungary’s Invitel. At a time when some of its rivals have scaled back their operations, Credit Suisse has actively expanded its staff coverage of central and eastern Europe, adding to an already long-established and highly experienced team of professionals.
In investment banking, Euromoney also felt compelled to recognize the sterling efforts of Bank of Georgia’s investment banking arm, BG Capital, for maintaining active coverage of some of the more offbeat destinations in emerging Europe. BG Capital breathed life into the Georgian capital markets with the reopening of the local bond markets with a landmark issue for Georgian Railways earlier this year and has established itself as a force to be reckoned in markets such as Belarus. It has quickly established itself there as the leading player and is one of the few banks to expand its coverage of struggling economies such as Ukraine, which are now poised to recover from recession and are thus generating additional revenue streams for the bank.
The best debt house title was arguably the most fiercely contested of the individual product awards, with Barclays Capital, Credit Suisse, Deutsche Bank, Royal Bank of Scotland and VTB Capital all in with a decent shout. Ultimately, however, it is HSBC that secures the title ahead of its rivals thanks to a bravura performance over the past year that has secured it a hatful of mandates from benchmark issuers in the region and has propelled it to the top of the class as a result. Over the 2009/10 period HSBC more than doubled its market share to 11.1%, thanks to an extended series of high-profile mandates for frequent sovereign issuers such as Turkey, Poland and Lithuania and corporates including Czech power company Cez. It extended its winning streak to include first-time transactions for Fyrom and Romania and managed challenging restructurings for two Ukrainian banks. However, it faces tough competition to remain at the top in 2010/11 and is seeking to strengthen its Russian franchise to help ensure that it stays ahead of the pack.
UniCredit secures the best equity house award on the back of a number of landmark transactions in different jurisdictions and product categories. Among the highlights of a highly successful 12 months for the bank was the €1.4 billion initial public offering for Polish power group PGE, the largest IPO in Europe in 2009. Also in Poland, which was the equity market story of the year in the region, UniCredit managed and advised on the €1.2 billion rights issue for PKO Bank Polski, the second-largest equity capital markets deal in Poland in 2009 after PGE. Elsewhere, UniCredit was joint bookrunner on the €833 million exchangeable bond for Hungarian State Holding convertible into drug company Gedeon Richter shares, which was the largest ever equity-linked issue from central and eastern Europe. Finally, it acted as bookrunner on the Lev199 million (€102 million) mandatory convertible preferred shares for Bulgarian holding company Chimimport, employing an innovative hybrid equity-linked structure that attracted a strong following from institutional and retail investors.
Bank of America Merrill Lynch retains its best M&A house title thanks to a consistent performance that helped to defy the turmoil and uncertainty plagueing the M&A markets in 2009/10. Among the landmark transactions the bank advised on during the period are the sale of Russian telco Sistema’s 50.9% stake in Comstar to MTS, which helped create the largest integrated mobile/fixed-line player in Russia and the Commonwealth of Independent States. Also in Russia, BAML advised Ursa Bank shareholders on its merger of equals with MDM Bank, the first transaction of its kind in the banking sector in Russia and one that helped to create the country’s second-biggest private bank. Other notable deals include the cross-border sale of a 50.1% stake in KazakhGold to Russia’s Polyus Gold to create the clear market leader in the Russia/CIS gold mining sector. Elsewhere, BAML advised broadcaster Central European Media Enterprises on its acquisition of more than 20 different assets owned by MediaPro Entertainment in Romania and it advised NRG Energy and URS Corp on the sale of German power group Mibrag to a group of public and private Czech bidders, led by Cez. Overall, BAML advised on most of the important M&A deals to be completed during a testing period, providing further evidence to support its claim to be M&A adviser of choice in central and eastern Europe over an extended period of time.
Another consistent performer is Deutsche Bank, which once again secures the best foreign exchange and risk management titles. In FX, Deutsche boldly went where others feared to tread, executing large trades and offering exotic products and strategies. It has also committed staff and management resources to covering the region, expanding its market share in central and eastern Europe as a result. Deutsche has executed €100 million-plus of FX trades in almost every currency in the region over the past year, ranging from the Czech koruna to the Kazakh tenge. Among the highlights of an impressive track record is a $1.5 billion dollar/rouble option, reckoned to be the largest FX option contract ever carried out in the Russian currency.
In risk management Deutsche Bank has endeavoured to strengthen what was already a strong franchise and widen the gap between itself and the competition. For unmatched breadth of coverage the bank can lay claim to being the clear market leader, being consistently active in all asset classes and jurisdictions – ranging from syndicated loans in Albania and equity hedges in Russia to structured repo in Turkey and development bank financing in the Black Sea region.
With the ability to serve more than 16 countries in the region and more than 2,000 employees covering central and eastern Europe, Citi once again secures the best cash management title, given its compelling mix of local expertise backed by global scale, reach and technological know-how, which enables it to offer its clients seamless cash management, trade finance and trade services. In central and Eastern Europe, Citi serves more than 10,000 clients, including top-tier local corporates, public sector entities, multinationals, small and medium-sized enterprises and financial institutions. During 2009 the firm increased cash management transaction volumes by more than 70% and average liabilities reached $17 billion during the same period.
With an unrivalled branch network across central and eastern Europe combined with a big presence in western Europe and beyond UniCredit is best placed on the investor services front to serve the needs of clients within and outside the region.
And the sheer breadth and depth of its presence in central and eastern Europe means that UniCredit is a big player in the region’s project finance market. Given the continuing risk-averse investment climate in 2009/10 the past year was an unremarkable one for project finance in general but UniCredit in particular did what it could to support new developments that came to market. Key transactions include its role as a mandated lead arranger and adviser on the €3.9 billion facility for the first phase of the Nord Stream Pipeline project and as coordinating mandated lead arranger on the €1 billion R1 Expressway project in Slovakia.