It is wrong to say that Standard Chartered has arrived in Asia, given that it has been there for more than 150 years, but the bank is now stronger than ever in the region, and business there is the core of its recent success. Asia contributes more than 70% of the income and 80% of the profit of Standard Chartered plc.
The core of Standard Chartereds wholesale banking pitch is the longstanding client relationships it has built up in Asia. Corporate clients used to borrow from Standard Chartered, then give lucrative capital markets and trading business to rivals. The bank is still the top regional lender in Asia: on the Dealogic league table of loans bookrunners in Asia in 2009 the top-five banks are Chinese or Indian state banks, and the sixth is Standard Chartered. Citi does not feature. The US bank says that it is still lending, and indeed it is. But Standard Chartered is now not just a pan-regional retail and wholesale bank but the top regional lender. That is opening doors for the firm, and thanks to the scooping up of skilled capital markets bankers from troubled rivals during the crisis and the retention of old talent, StanChart can act on those opportunities. Witness the banks role in Indian telecoms company Bhartis $10.7 billion acquisition of Africas Zain. The deal displays everything about the powers of the new Standard Chartered: its footprint in the key emerging markets of Africa and Asia; its ability to provide finance for large cross-border deals in those markets; and its new-found ability to win advisory business on top of these deals thanks to its expanded investment banking capabilities.
Standard Chartered has advanced across all areas of banking, and it benefits in Asia from having the global heads of key businesses, such as transaction banking, the newly rebuilt private bank and capital markets, headquartered in the region. Analysts regard the bank highly: its stock price has consistently outperformed such rivals as Citi and HSBC in the past couple of years, and investors like the firm for offering a purer play on emerging growth markets such as Asia because its performance is not dragged down by stagnant western markets. The purchase of Cazenoves Asia franchise now looks like one of the few smart acquisitions of a whole business in the crisis, at a stroke filling the obvious gap in the banks cash equities platform and boosting its credentials as an underwriter. In its first year of operation, Standard Chartereds equities business worked on IPOs, secondary placements and rights issues with a total value of $3.5 billion. Small fry by the standards of the big investment banks in the region but an impressive return for a first years work, and proof that the model is working.
Another deposed champion is UBS, last years winner of the best investment bank award. Like Citi, it is still a good franchise and had a typically strong year on the numbers. But Euromoneys awards are not just about sheer volume of deals. They are also about quality of execution, breadth of platform and an ability to hit the key themes of the year that demonstrate forward-thinking advice to clients. UBS is by no means poor at any of those in Asia but Goldman Sachs was the best and deserves the accolade of best investment bank. Most notable among the gaps in UBSs franchise was its weak performance in Japan. For all the excitement about China in the headlines and in the conversations among bankers and investors in the region, it is worth remembering that Japan is still the biggest market for core investment banking revenues in Asia. As a striking aside that emphasizes the point, the leading investment bank on Dealogics revenue league table for Asia Pacific including Japan in this years awards period was Nomura, with more than $1 billion in revenues, almost twice that of the nearest competitors.
Japan accounted for the four largest equity deals across Asia. Goldman Sachs worked on three of them, two capital raises for SMFG (with which it admittedly has a capital alliance) and the $11 billion Dai-ichi Life IPO. These successes were indicative of the Goldman Sachs strategy: rather than attempt to maintain a broad pan-regional platform serving large numbers of clients, it picks its battles and focuses on the key industry themes. It worked, for example, on the years two most impressive M&A transactions. The first was a role as a sell-side adviser on the acquisition by Chinas Minmetals of assets from Australias OZ, an example of a crucial China outbound deal into Australia that actually got done. The second was again on the sell side, in the stand-out post-crisis LBO in Korea in which KKR bought Oriental Brewery from Anheuser-Busch InBev. In equities, Goldman Sachs hit the key themes better than rivals; in M&A, it worked on the stand-out transactions; and in debt it belied its reputation for tending to disregard the product by working on some big transactions. These included a $4 billion series of bonds for Commonwealth Bank of Australia this years best bank in that country that was the largest ever financing for an Australian bank at the time. Goldman Sachs has also begun to score wins in the important Chinese domestic bond market, with an Rmb40 billion ($5.8 billion) deal for key client ICBC again the winner of the best bank award in China this year. Goldmans client list is impeccable; beyond the core investment banking products it is able to serve those clients with a secondary markets platform that has perhaps the best breadth of product offering in the region, even if it does not beat outright the competition on any one of those.
HSBC remains Asias most complete debt house. Its closest rival for the accolade, Deutsche Bank, is by a small margin the more accomplished bookrunner of G3 currency bonds and it was an important year for raising dollar debt in particular. But nobody in Asia underwrote more local-currency bonds in this years awards period, no bank arranged more syndicated loans and none provided clients a more complete package of debt finance options across Asias markets. HSBC was bookrunner on 394 issues worth in total more than $30 billion in Asia ex Japan, as against second-ranked Deutsche Bank with $29 billion from 153 trades. That disparity in the number of deals for almost equivalent volumes hints at the most common criticism of HSBC: that it is a deal-processing machine with less finesse than its investment bank rivals. HSBC went a long way towards answering that criticism this year, innovating on small deals such as the 10-year bond for the Philippines unrated ICTSI and large, such as Kookmin Banks $1 billion covered bond, the first of its kind in Asia. The bank offers its clients the most diverse funding options in Asia, with the glaring hole being its lack of penetration in Japan. Nonetheless HSBC deserves to retain the accolade of best debt house in Asia for the volume and range of deals it executed, for the breadth and depth of its client base, and for becoming a defter debt desk in difficult markets.
The period between April 2009 and March 2010 encompassed three phases in equity markets. First, markets reopened after the trauma of the previous 18 months; then they gathered momentum towards the end of 2009 as almost two years worth of pent-up deals competed to get done; then they entered a period of volatility as investors became picky, concerned about oversupply and such problems as the European debt crisis. JPMorgan is the bank that best identified these trends and guided its clients through a volatile year. It did not beat the usual contenders for best equity house on volume, ranking fourth behind UBS, Morgan Stanley, and Goldman Sachs. But this year was not about churning out sheer deal volume. Where JPMorgan excelled was in the timing and execution of its deals and in understanding the key trends of the year ahead of the competition. This began early in the awards period with key deals such as the April IPO of Chinas Zhongwang, the first billion-dollar IPO globally in 13 months; the July IPO of BBMG, the first H-share listing in almost a year; and the April $19.5 billion rights issue for HSBC, the largest such deal ever.
JPMorgan foresaw the trend for Japanese banks to require huge volumes of follow-on equity, for example, and in an unprecedented coup by a foreign house was bookrunner on deals for all three megabanks. It also demonstrated an improved geographical reach, working on southeast Asias largest-ever IPO (Malaysias Maxis), the biggest Singapore IPO since 1993 (CapitaMalls Asia), and key India deals such as Tatas $500 million GDR and subsequent convertible bond. The bank was on three of the top five India deals, three of the top four Japan deals, the biggest southeast Asia deal, and key Australia offerings such as Rio Tintos $3.6 billion deal. The general feeling in Asia is that JPMorgans overall investment banking franchise had a good year but not the spectacular one many were expecting given the strength of the overall franchise relative to its global peers. That might be so but JPMorgan had a breakout year in Asia-Pacific equities by correctly calling the markets more often than some bigger rivals, and by working on the most important deals across the regions key equity markets. The banks mandate on the Agricultural Bank of China IPO immediately after the awards period ended, when more storied rivals such as UBS missed out, was vindication of its new-found status.
Morgan Stanley deserves to retain its award for best M&A house in Asia in another competitive year in which the league tables were distorted by large deals that did not merit consideration in proportion to their volume when deciding the award. Last year the ultimately unsuccessful Chinalco/Rio Tinto deal dominated pitch books; this year many franchises chose to lead with their work on Prudentials attempted takeover of AIA.
This was an unwise strategy given that while the $35 billion deal was undoubtedly large and bold, it was also poorly handled by both sides, arguably not really an Asia deal given that the seller was from the US and the buyer from the UK, and unlikely to close in the form originally announced.
So why does Morgan Stanley deserve its win? It was a market leader in deal volumes; excluding Japan it ranked first on both an announced and completed basis, and second behind Goldman Sachs when Japan is included. More important, however, the team led by Ed King again hit the key themes of the year and showed their knack of backing the right horse on deals. Many global firms sold non-core Asian assets, and Morgan Stanley worked for several of them including AIG in its sale of Taiwans Nan Shan, RBS in its sale of assets to ANZ, and the UKs Aviva in the sale of assets to NAB. In a year of greater than normal deal uncertainty, it paid to be on the sell side.
While these were all global clients of the firm selling in Asia, Morgan Stanley also executed deals for top clients in the region such as Temasek, PetroChina, CIC, Reliance and Citic Group. It managed a top-three ranking in all the important markets and almost all of the key industry sectors, and led the industry in winning mandates on deals involving the increasingly active sovereign wealth funds. Stand-out cross-border deals included Temaseks sale of Chartered Semiconductor to Abu Dhabis Advanced Technology Investment Corporation and CICs $2.2 billion investment in US power firm AES.
HSBC retains the award for risk management, again using its broad regional platform to help clients navigate a volatile year. The bank has taken advantage of investors perception that it is not as conflicted as some investment banking rivals, making proprietary trades on the one hand while advising them on the other. HSBC has instead focused on expanding its offering, boasting a larger team in the first quarter of 2010 than it did the previous year at a time when many rivals have had to cut back.
Clients inside Asia are increasingly looking for coverage of other regions within Asian office hours, and a classic demonstration of the strengths of HSBCs model was a mandate for a Chinese client looking for hedging solutions on a deal in Brazilian reais. The bank had recently brought a Brazil sales team to Asia and was able to seize the mandate from the Chinese clients financial advisers as a result. The bank demonstrated a particular expertise in helping manage interest rate and currency risks for clients financing transactions during a period of continued market volatility, often working on referrals from its global platform or other parts of the business such as project finance.
Clients in Asia were looking for simple and effective hedging over complex structuring; impartial advice over conflicted sales strategies; global reach over parochial knowledge; and sales teams that offered a range of ideas over product-pushers keen to book profits in their own departments. HSBC delivered in all of these areas and deserves to retain the award for best risk management house in Asia.
Although Deutsche Bank did not manage to win the risk management award back from HSBC, it was that firms closest competitor in that category and the clear choice for best foreign exchange house. Deutsche has been Asias best FX house for some years, and while it is tempting to try to find excuses for challengers to dethrone it the truth is that Deutsche has continued to build on its lead. It tops the Euromoney poll as a provider of liquidity in the region, its autobahnFX platform has been a winner in the increasingly important e-trading market and it increased revenues by 9% for 2009 off an already large base. The banks onshore trading presence across all of Asias important markets helped it stay informed about local-currency trends, as well as giving it the platform to help clients with more exotic FX hedging needs get their deals done.
The award for best cash management house goes to Citi, despite fierce competition from usual challengers such as Deutsche Bank and HSBC and faster-growing rivals such as Standard Chartered, Bank of America and JPMorgan. For proof of this increased competition, look at the investment-banking-style round of poaching that went on in transaction banking as Bank of America took Citis Ivo Distelbrink in February 2010 and then JPMorgan hired Deutsches regional head, Tom DuCharme, in June. Citi takes the award for offering the best all-round platform.
While rivals sniped that the bank was losing clients thanks to Citis global problems, in fact the franchises client deposits in Asia grew 30% in 2009 to $110 billion, providing more products in more countries than any other rival. Industry surveys show that Citi is improving in its area of traditional weakness, client service to the most demanding big regional firms. That weakness cannot anyway be too crippling: the firms revenues climbed 4% year on year in 2009, a list of client wins seen by Euromoney was full of top Asian names and the business is undoubtedly the jewel in Citis Asia-Pacific business, which itself is the stand-out region for the firm globally. New regional head of treasury and trade solutions Sridhar Kanthadai has inherited a fine business.
Société Généraleclaims the award for best project finance house in Asia. One deal stood out: the firm worked as financial adviser on the biggest ever pure project finance deal, a $14 billion liquid natural gas project in Papua New Guinea that will help the country extract and commercialize its precious resources. The bank helped achieve an oversubscribed funding package despite difficult market conditions and complex financing arrangements involving loans and a range of foreign export credit agencies.
Société Générale also worked on 2009s other outstanding project finance deal, the Aquasure consortiums ambitious project to alleviate South Australias severe drought problem by constructing the worlds largest desalination plant. The deal is projected to cost A$4.9 billion, and the state-supported debt was refinanced in November 2009 in an oversubscribed deal part backed by Korea Export Insurance Corporation. Other SG deals during the awards period included work in the power sector for Singapores Senoko Power project and Indias Cairn.