Chief executive Ralph Norriss mantra at Commonwealth Bank of Australia is Determined to be different. In the past 12 months thats exactly what CBA has been: different to its average recent history, and different to its peers.
One analyst in Australia nominates CBA by a country mile great performance and best positioned. Even by Australias standards, where the global financial crisis appears to have been little more than an irksome blip for most banks, CBAs 2009 performance was outstanding: A$4.42 billion ($3.63 billion) net profit, strong operating income growth, 15.8% return on equity and excellent provisioning and capital ratios. It was a sufficiently strong position to allow it to buy Bankwest and St Andrews both at well below book value in late 2009, restoring the group to the title of the nations largest bank and giving it a powerful retail business in booming Western Australia.
CBA has always been big but it hasnt always been good, particularly at the front end where the teller or sales agent meets the customer. Norris has made customer service a mainstay of his tenure as chief executive and it is showing in surveys and customer numbers. Analysts also like his drive in IT and operational efficiency and have high hopes for the expanded institutional banking and markets division and the newly formed business and private banking unit.
Deutsche Bank didnt top the local-currency, international or residential mortgage-backed league tables in Australia in our review period, but it was the only bank to log at least a top-four finish in each of them. Its that across-the-board ability to service issuers that wins it our award, despite strong competition from such names as JPMorgan on the international side and Westpac on the local.
According to Dealogic, Deutsche raised the equivalent of more than $17 billion in total for Australian clients, or foreigners coming to Australia, in 48 separate deals. There have been many highlights: two A$4 billion deals, one of treasury indexed bonds for the Australian government, the other an unguaranteed issue for the Queensland treasury, the biggest bond issues ever priced in Australia via bookbuild. There was also progress in bringing foreign issuers into Australia, notably the European Investment Bank, which raised A$1.5 billion.
Deutsche also took both corporate and bank issuers to multiple foreign markets: Westfield, Westpac and Commonwealth Bank to the US144a markets; Woodside, Westpac and Barrick in dollars; Telstra, Wesfarmers, NAB and ANZ in euros. Besides that the bank arranged hybrid deals for three of the four main commercial banks in Australia and ranked second in the country for RMBS deals. Add leveraged loans and sophisticated debt advisory and the picture of a bank active across the debt spectrum is complete.
The reason UBS wins the Australia equity house award year after year is not just because of its consistent position at the top of the league tales but the whole package that goes around it. Yes, UBS handled the most deals in our review period (50), raising the most money ($11.45 billion equivalent), and got on some of the key deals over that period: the Woodside Petroleum, ANZ and Telstra follow-ons, the ANZ and Commonwealth Bank convertibles. But on top of that its the leader in block trades A$3.4 billion in our review period, more than two-thirds of the market. Its a leader in aftermarket support, in equity derivatives, in equities research. And in trying conditions it has consistently been innovative. Its offer structure for Asciano enabled the company to raise A$2.4 billion in a secondary three times its issued capital on an accelerated and underwritten basis. Its A$1.7 billion placement for GPT was the first major re-issue in difficult markets. And its A$1.6 billion raising for Amcor, to help it buy Alcan in August 2009, was a post-crisis pioneer in acquisition financing. Little wonder that when the Future Fund, Australias closest equivalent to a sovereign wealth entity, picked a single bank to underwrite the sale of the funds A$2.4 billion block in Telstra, it went for UBS.
It says something about the competitive landscape of M&A and the quirks of statistics that attempt to measure this field that no fewer than four banks consider themselves to have led the league tables during our review period. All the candidates make a decent claim, but Macquarie (which tops Dealogics calculations on both an announced and completed basis) beats JPMorgan, Goldman JB Were and UBS to the award.
It is common to protest that Macquaries league table standing in M&A stems from deals involving its own many and varied assets and satellites. This year, barring the sale of Macquarie Communications Infrastructure Group to the Canada Pension Plan Investment Board (a great deal for Macquarie by any measure), that wasnt really the case. Its also common this year to claim that the pending BHP Billiton-Rio Tinto joint venture utterly distorts the league tables; this is true, but even removing it leaves Macquarie which is advising RT looking just as strong.
Macquarie advised Axa Asia Pacific on the Axa and NAB bids for its various assets; Temasek on its purchase of Eircom Holdings; Canadas Eldorado Gold on its purchase of Sino Gold Mining; and Viterras purchase of ABB Grain. Foreign attempts to buy Australian assets are a key theme of recovery, and in this area in particular Macquarie has thrived.
Differentiating between the strategies of Chinas biggest banks can be difficult, given that the top state-owned banks decisions are dictated as much by common externally imposed policy directives and macroeconomic conditions as by unique management views. Having answered the call to swell their books in response to the crisis, and then to rein in that lending as the financial stimulus money flooded the system, the banks had to balance managing that lending with developing new sources of income through fee-based business and international development. Industrial and Commercial Bank of China, the worlds largest bank by market capitalization, succeeded best in that task and deserves the accolade of best bank in China. The consensus among analysts and other observers of the banks performance is that it has a sound slow-and-steady strategy, spotting an opportunity to build out those fee-paying businesses at home while smartly building out overseas. ICBC increased net profit by 16.3% in 2009, increased net fee and commission income by more than 25%, and grew investment banking income an impressive 56.2%. Overseas, it took a 70% stake in Bank of East Asia (Canada), launched an offer for ACL Bank in Thailand, and merged Seng Heng bank and its Macau branch into a Macau subsidiary. Perhaps most significantly the bank managed a drop in both its NPL balance and the overall ratio of non-performing loans on the books. While market participants continue to fret (with some justification) about the possibility of that trend reversing if stimulus loans go bad, for now ICBCs improved risk management tools are working and the worlds biggest bank looks in good shape.
UBS is on a very short list of the top investment banks in China, and might find the decision to award it best debt house somewhat perverse when it is the franchises strong equities business that wins it more headlines. Nonetheless, it is an award well deserved. Local franchises Citic and CICC still dominate the domestic league tables, while most foreign firms are excluded from even competing because they lack the relevant licences. UBS does have such a licence and in the awards period parlayed that strength into a remarkable string of local Chinese debt deals, ranking third overall by debt revenues on Dealogics table and eighth by volumes, by far the top foreign bank. Most market participants believe that Chinas local bond businesses (both short-term paper and corporate bonds) are among the most exciting capital markets opportunities in the region, and UBS deserves the award for its superb head start.
In equities, UBS had another good year, with the deal machine presided over by rainmaker Henry Cai bringing in the mandates as ever. The bank was, however, hit by a run of bad news that, while some of it technically came outside the official awards period, coloured an otherwise successful run. First, the bank missed out on a slot on the Agricultural Bank of China IPO, universally agreed to be the big China mandate of the year, and then in quick succession lost ECM head Mark Williams and capital markets head Stephen Barg, to Nomura and Goldman Sachs respectively. The franchise is likely to rebound from these events, and they were not solely responsible for UBS missing out in China, but for now the accolade of best equity house goes to Morgan Stanley. The US firm had a great run of initial public offerings in the period under consideration, including a mandate on the years largest, the $5.1 billion MCC deal. It also worked, like UBS, on the groundbreaking IPO of Longyuan Power, and the difficult but successful Sinopharm offering, but beat its rival in the follow-on offerings space by working on more deals for a greater total volume.
Morgan Stanley also takes the accolade for best M&A house in China. Many banks chose to focus their pitching efforts around the potential takeover by the UKs Prudential of AIA, a questionable strategy given that the deal looked a tough sell from its inception and was at the time of writing all but dead. It is also arguable to what extent the deal should be credited to China, given that the seller was US-based and the buyer UK-based. Ignoring that very large deal, Morgan Stanley deserves the China M&A award for fine work on other mandates, including deals in the critical resources sector such as CNPC (and Shells) acquisition of Arrow Energy and the same clients purchase of Kazakhstans MangistauMunaizGaz. It also proved its worth in the other crucial sector of financial institutions, working on TPGs sale of Shenzen Development Bank to Ping An Insurance an extremely complex deal from a regulatory standpoint given that it involved an insurer buying a bank and on CICs investment in AES Corp.
No bank makes more money in Hong Kong than HSBC. That alone is not enough to guarantee the firms annual claim to be the territorys best bank but when combined with its masterful branding, dominance of the local capital markets and now the presence of the global chief executive the total picture is formidable. HSBC has benefited from other banks misfortunes, largely avoiding the highly visible (if not hugely successful or numerous) protests related to allegedly mis-sold consumer products that failed post-crisis. It will need to be careful not to lose that advantage, however. Although still far ahead of the competition in overall profitability, the bank had as tough a year as those rivals, with net income and return on equity down year on year. More heartening, however was the increase in HSBCs capital adequacy ratio from 13.4% to a regulator-pleasing 16%. Regional rival Citi, which finds itself in the unusual position of underdog in Hong Kong, has made efforts to narrow the gap by offering customer-pleasing options such as later branch opening hours that would be expensive for HSBC to match. It will be interesting to see how the firm still known locally as Hong Kong Bank responds. Local rivals, meanwhile, are building on connections with mainland China and are posing an increasing threat.
HSBCs dominance of the Hong Kong debt market might be harder to challenge. The firm had a 42% market share of Hong Kong dollar bond issuance in the awards period, accounting for $60 billion-worth of deals as against half that amount from second-placed Standard Chartered. It was also ranked as the top bookrunner for US dollar bonds and top arranger of loans. Beyond the sheer numbers, however, HSBCs list of clients, such as Noble, Swire and Hutchison Whampoa, contains the territorys top names while the 30-year and 40-year notes for Towngas demonstrated innovation as the longest maturities ever for Hong Kong dollar bonds.
Citi retains the award for best equity house in Hong Kong from last year, topping this years league table comfortably with 13 equity and equity-linked deals as against second-placed UBSs six. The years key transactions were the two gaming IPOs, Sands China and rival Wynn Macau. Of the two, the $2.5 billion Sands deal that Citi (and others) worked on is generally considered to have gone better, with the Wynn deal slumping significantly after pricing. Citi impressed with the longest string of equity placement deals among its competitors, including work for Noble Group, Li & Fung, and Poly HK. Beyond competent deal-handling, Citi showed innovation with a loan and warrants structure for shoemaker Yue Yuen after a rival suggestion of a convertible bond failed.
The impending failure of the Prudential/AIA takeover at the time of writing made the decision as to how to credit participation in it for the best M&A house in Hong Kong easier. Ignoring that deal, Goldman Sachs deserves the award in an otherwise relatively quiet year for work on the $1.38 billion sale of Advents stake in Partner Communications, the biggest retail apparel deal of the year globally in the China Resources Enterprises/Esprit China deal, and smaller deals for AIG investments and a real estate investment trust.
Standard Chartered wins the award for best bank in India, a prize usually carved up between the two biggest local hitters, HDFC and ICICI. That decision might surprise some but the reasoning behind it is sound.
For one, StanChart is now part of Indias core banking landscape. Its local earnings rose 19% in 2009 to $1.06 billion and by more than 40% if a one-off 2008 sale of the banks local asset management operations is stripped out.
That makes India StanCharts second most profitable market behind Hong Kong, generating more than 20% of group earnings. The largest international lender in India by a country mile, with 94 branches and ATMs in 42 cities, it also boasts 152 unbroken years of market presence.
But one needs to look beyond mere statistics. A recent deal to allow StanChart to issue Indian depositary receipts struck earlier in 2010, completed in late May and unprecedented for a foreign lender underscores the trust Delhis finance-wallahs have in a company with 17,500 staff, making it one of the nations leading employers. StanCharts sale of $530 million-worth of IDRs was as much about building on a strong branding presence as about local financial bookbuilding. The deal looked to be in trouble at one point, with investors uncertain despite the strong brand name but it succeeded in the end.
StanChart cannot compete in size alone but then nor should it. Its relatively wealthy customers seek both scale and international presence. Larger local rivals ICICI and, particularly, HDFC increased profits in 2009 and the first quarter of 2010. But both are elephantine and often plodding institutions embedded in a fast-growing tiger economy.
Axis Bank a close second in this award is also one to watch, boasting a strong domestic asset management and retail banking presence, and driven by a newish and aggressive chief executive, Shikha Sharma.
But this is StanCharts year. On the subcontinent and elsewhere, the emerging markets specialist is not a foreign arriviste but a listed pillar of the local banking industry. Standard Chartered India has officially arrived.
Citi had an impressive year, and rightfully deserves this award as the best overall investment bank at work in India. The countrys largest foreign investor (it has ploughed $4 billion into India over the past two decades), Citi trounced all comers including the 2009 winner, Deutsche Bank, which had a weak year thanks to its lacklustre equities business.
In a year notable for a steady thrum of largish but never truly standout capital market deals, Citi never missed a trick. It topped none of the rankings polling eighth in DCM, seventh in mergers and acquisitions and third in equity capital markets according to Dealogic but it was the only investment house present across all top-10 league rankings.
A certain amount of internal upheaval was inevitable, given financial dramas of the past few years. But Citi India sailed through it all with a touch of serenity. The only great drama involved Ravi Kapoors promotion to head of global banking India. Kapoor replaced Pramit Jhaveri, who moved upstairs to run Citis sprawling pan-India operations.
Where Citi specialized was in providing rock-steady financial support to key clients, mixed with the willingness to innovate in order to create. Among 31 completed ECM deals worth $4.2 billion was a joint role underwriting National Mineral Development Corporations $2.2 billion sale the largest follow-on offering since 2004.
Other standout deals include joint books on NTPCs $1.8 billion follow-on sale in February 2010 and a scattering of innovative M&A transactions. That list includes advising UB Group on the restructuring of its local venture with Heineken, and as co-adviser to GTL Infrastructure on its $1.8 billion acquisition of Aircels telecom towers business.
Indias debt markets are nothing if not predictable. Deals are lined up months in advance and apportioned among the usual suspects. Yet year after year a select few underwriters stand out, and the past 12 months was yet again dominated by the same lenders, notably Axis, ICICI and Standard Chartered.
This year the award goes to Axis Bank, unlucky in its own way not to secure the nod for Indias best bank. But it deserves the debt award after completing the most DCM deals of anyone in India over the previous 12 months.
The standout among Axis Banks 101 debt market transactions, which raised a cumulative $4.68 billion, mostly for state-run institutions, was a double August 2009 investment-grade corporate bond for HDFC. That deal raised more than $1.6 billion for the Indian home-loan specialist.
Other notable transactions include a $506 million September 2009 corporate bond for the Rural Electrification Corporation and a gaggle of mid-sized deals for such companies as Power Finance Corporation and Power Grid Corporation of India.
Axis Banks closest rival, StanChart, had a solid year, raising capital for such companies as Tata Steel, Tata Chemicals, and Air India. But in DCM terms this was Axis Banks year. It didnt do the biggest deal of the year but it did most of the rest and did them well.
JPMorgans equities team had a solid 12 months. It edged Morgan Stanley into second at every stage on equity offerings and overseas equity and equity-linked sales, completing 18 deals worth $4.45 billion, for a shade over 13% of the market, according to Dealogic.
The US bank, which avoided the worst of the internal seizures suffered by key international rivals, was present on most standout transactions, including power-generation firm NTPCs $1.8 billion follow-on offering and a $1.6 billion follow-on sale by Sterlite Industries. JPMorgan was sole books on Vedanta Resources $1.25 billion June 2009 convertible bond, the largest CB ever issued by an Indian corporate. Other highlights include a $780 million May 2009 accelerated bookbuild for real estate company DLF Indias largest-ever block trade.
Two years ago Barclays Capital had virtually no India franchise but that changed overnight on August 12 2008 when the bank snapped up a 50-strong global team from ABN Amro that included India M&A veteran Frank Hancock.
Hancock, now head of mergers and acquisitions India, in turn hired selectively, taking on Deepak Bhandari and Sumit Ganguly. More M&A dealmakers notably telecommunications specialists - arrived from defunct Lehman Brothers, and BarCap was in business.
A small team needed to be choosy, opting to focus on two sectors: telecoms, and oil and gas. Many questioned its strategy but the deals rolled in, leaving BarCap in close contention for top spot in Dealogics M&A league tables over the past year, and a clear winner in first-quarter 2010 rankings.
BarCaps 800-pound gorilla was Bhartis $10.7 billion purchase of Zain Groups Africa operations. Barclays acted as joint M&A adviser to the Indian telecom and joint lead arranger, helping raise $7.5 billion to finance the deal.
Other deals stand out, notably Reliance Industries $1.7 billion acquisition of a 40% stake in Marcellus Shale, part of Pittsburgh-based Atlas Energys shale gas portfolio.
Bank Central Asia (BCA) is Euromoneys best bank in Indonesia this year. The bank enjoys (some might say suffers) a reputation for conservatism in its home country, with one competitor deriding it as a bank that has always disliked lending. Certainly the banks loans-to-deposits ratio of just over 50% at the end of 2009 makes it among the most under-leveraged in Asia. Analysts now see that as a strength. The bank already has the largest network of ATMs among its peers, and is now poised for rapid expansion in what is still a hugely under-banked country. BCAs return on equity of 30.1% at the end of 2009 made it among the best-performing banks in Asia, never mind Indonesia, and it scores highly on efficiency measures.
Government-mandated fixed-return rates of 7% on time deposits have made funding expensive for Indonesian banks at a time when many of them see the biggest opportunity in building out micro-banking and consumer credit businesses across the relatively under-banked archipelago. BCAs great advantage is that it has managed to keep costs low and revenues high. Analysis provided by a rival bank shows it to have the highest revenue per employee ratio among Indonesian banks, as well as one of the lowest ratios for costs over assets. BCAs recent conservatism has positioned it superbly, and it deserves the accolade of best bank in Indonesia.
Barclays Capital had a strong start to 2010, working on all three of the sovereign bond mandates in Asia: Indonesia, Philippines and Vietnam. The Indonesia deal included the countrys first-ever sukuk offering, also the regions first such deal since 2007. Some banks do not compete for sovereign debt mandates, saying that they pay very low fees, but Barclays Capital smartly sees them as gateways to building reputation and client respect as it develops its Asia franchise. The bank deserves the award for best debt house in Indonesia, winning on both volume of deals it topped the international bond bookrunner table with almost 30% market share and quality. BarCap was the sole adviser for the acquisition of PT Bukit Makmur by PT Delta Dunia, and demonstrated its claim to be a full-service investment bank by arranging the $600 million loans and bond financing needed. It also worked on the innovative LBO financing for PT Buma. Local firm Danareska Securities tops the local-currency tables; Credit Suisse had its usual strong year in debt and ran Barclays Capital extremely close on overall deal volume, the strength of its clients and innovation.
Both would have been worthy winners but Barclays Capital deserves its first award as the best debt house in the country on the merits of its performance this year, regardless of the fact that this came from a less well established Indonesia franchise.
Local firm Mandiri Sekuritas wins the title of best equity house in a quiet year for Indonesian IPOs. Its standout transaction was the Rp1.89 trillion ($204.4 million) IPO of Bank BTN, the countrys largest mortgage finance bank. The privatization deal was the years largest IPO and accounted for almost half of the new shares issued in 2009. Mandiri worked tirelessly with the other underwriters and BTN management on a global roadshow, with the result that the deal was oversubscribed and the shares have risen in value since issuance. Mandiri Sekuritas deserves the award for its work on that deal as well as the fact that it topped the league table thanks to several other smaller IPOs, led the field in secondary market deals and has a research team that covers more than three-quarters of the market capitalization of the exchange.
Last year Credit Suisse took the overall investment banking award for Indonesia. This year it performed well again across equity, debt and M&A, but the awards have been split up into those categories despite a modest deal flow in each because other firms beat Credit Suisse in equity and debt. It is still the top M&A house in Indonesia, however, advising on more deals by volume and number than any competitor. The key deals were the $1.3 billion acquisition of Berau Coal by Recapital Advisors, a $885 million deal for frequent CS client Bumi, and sell-side work for Rajawali Group involving its stake in cigarette maker Bentoel.
Japans banks had a fairly miserable year, as has been customary for the past couple of decades, raising large amounts of capital but doing little to excite their long-suffering shareholders. Second-tier banks Shinsei and Aozora cancelled their ill-advised merger and were left looking weak, while the megabanks continued their program of mass capital raising in anticipation of stricter requirements when the Basle III regulations are implemented. With the lack of a credible second-tier challenger this year, one of the megabanks was always likely to take the award for best bank in Japan and MUFG deserves the nod. Japans largest financial group had the smallest share price decline of its peers over the 12 months, and recorded the best improvement in its earnings. Critics have rightly slammed the firms securities tie-up with Morgan Stanley for ending up with an awkward dual-company structure rather than a single entity but despite these reservations the combination is yielding results for both firms both at home and overseas. MUFG reported profits of more than ¥10 billion ($109.5 million) attributable to its new venture with Morgan Stanley, and the bank also earned a healthy dividend from its 21% stake in the US investment bank. These results are an important step for the Japanese group given that the megabanks have long struggled to improve profitability at their core banking units. Analysts praise the banks management for taking steps towards improving its overseas interests, although few think that any of the megabanks have succeeded outright in revolutionizing their plodding business models. In the financial year ended on March 31 MUFG returned to profit, making ¥388.7 billion, after heavy losses the year before.
Minoru Shinohara, senior managing director, investment banking at Nomura
Minoru Shinohara, senior managing director, investment banking at Nomura
While Nomura clearly dominates in Japan, foreign firms continue to make money in what is still the regions most lucrative market for investment banking by targeting selected niches where they can outperform the locals. One such franchise is the newly invigorated Bank of America Merrill Lynch, this years best debt house in Japan. Merrill Lynch was a strong Japan franchise before the recent crisis damaged that reputation. Now clients are returning, perhaps encouraged by the backing of Bank of America and the franchises renewed focus on clients rather than its own book. The timing is good: Japanese issuers largely stayed away from the international bond markets in 2009 but in 2010 there has been an improved deal flow, with a highlight being the $2 billion deal for Bank of Tokyo-Mitsubishi UFJ in January that Bank of America Merrill Lynch worked on. The US franchise was the top foreign debt house throughout the first quarter of 2010, and is the clear momentum player in the field, closing four other deals in January alone, for JBIC, local governments, Japan Housing Finance Agency and Nissan Motor Acceptance Corp. Although local houses still dominate the league tables thanks to a steady flow of domestic deals that the international houses will never match, Bank of America Merrill Lynch deserves the accolade of best debt house in Japan for rebuilding itself as the leading foreign alternative and for the quality of its execution.
JPMorgan deserves the award of best equity house in Japan for an extraordinary feat: it won mandates on the enormous follow-on equity issuances of all three megabanks in 2009, despite having no capital tie-ups with any of those firms. Bookrunner mandates on big equity deals for the megabanks (MUFG, Mizuho and SMFG) are typically allotted to Nomura, the securities firm affiliated with the corresponding megabank and then a foreign house that has a capital tie-up with the megabank, such as Morgan Stanley and MUFG, Merrill Lynch and Mizuho, or Goldman Sachs and SMFG. JPMorgan was able to parlay its lack of such a connection into a strength, arguing that its independence and the quality of its global sales force would be invaluable for the megabanks as they went about raising billions of dollars more in equity. The plan worked and the US firm worked on SMFGs ¥923 billion June deal, Mizuhos July ¥552 billion offering and the ¥1.1 trillion issuance by MUFG in December. Although JPMorgan will have been disappointed to miss out on the periods other blockbuster deal, the aforementioned Dai-ichi Life IPO, securing all three megabank deals was a real achievement and one that will have made good money for the firm.
One the same day as the Mizuho deal launched, JPMorgan also worked on All Nippon Airways $1.5 billion deal, the first global transaction by a Japanese corporate since 2006. Rivals criticized the deal at the time but the shares have subsequently bounced back and in view of rival JALs bankruptcy woes the ANA deal looks increasingly smart. JPMorgans Japan capital markets head, Doug Howland, concedes that there was an element of his firm being in the right place at the right time in securing the megabank clean sweep, and the firm has missed out on a more recent deal as the issuers return to their old mandating habits post-crisis, but for recognizing an opportunity and acting on it the firm deserves the title of best equity house in Japan.
Koreas banks struggled in 2009, and then experienced an almost universal recovery in the first quarter of 2010. Judging which of them performed the best in the Euromoney awards period is difficult. The largest commercial bank, Kookmin, has a sound-looking balance sheet but is struggling with governance problems and a lack of leadership following the regulators ousting of the chairman. Korea Exchange Bank, last years winner, still enjoys good revenues thanks to its near-50% share of the FX market, but the saga of its potential takeover by a larger domestic or foreign rival remains unfinished and is frustrating new chief executive Larry Klanes attempts to convince the market of a clear strategic direction. Hana Bank has launched an ambitious reorganization of the way its business units interact with each other that might in time bear fruit, while rival Woori is a steady but unspectacular performer. Neither convinces as a best bank in Korea on current performance. That leaves Shinhan Bank, winner of this award in 2008 and the firm most commonly cited by analysts and bankers in Seoul as being the industry leader in Korea. Analysts tend to praise Shinhan Card first as a source of strong revenues for parent Shinhan Financial Group but the banking divisions performance picked up strongly in late 2009 thanks to more profitable lending and continued to improve this year. With increased earnings, Shinhans tier 1 capital ratio rose from 11.6% to 12.4%, while reducing funding costs meant that net interest margin rose to 2.18%. Shinhan Bank deserves to be named best bank in Korea for navigating a tough 2009 better than rivals, and for the sound management strategy that wins it plaudits from local and international peers.
Koreas debt market is divided between Korean won deals generally arranged by local securities firms and big-ticket dollar deals for frequent borrowers such as Kexim that are run by top international houses in the country such as Deutsche Bank and Bank of America Merrill Lynch. Standard Chartered is not hugely successful in the latter market, and will strike some as an odd choice for best debt house in Korea, but the firm has gone from being nowhere in Korea debt as recently as 2008 to being the top foreign house in the overall debt league tables by focusing on other aspects of the business. The banks regional strategy is to use its undoubted lending prowess to win capital markets and advisory mandates, and nowhere was that more in evidence than on the years standout Korea transaction, US private equity fund KKRs purchase of Oriental Brewery from Anheuser-Busch InBev. Standard Chartered underwrote a portion of the $900 million equivalent financing package for the groundbreaking deal in volatile market conditions, funding that contained $310 million-worth of floating-rate notes and a W652.35 billion ($528.3 million) term loan facility. Beyond using its balance-sheet strengths, however, the bank has impressed by making headway in the local-currency markets that rivals dont even attempt to enter. The bank is the only foreign bank in the top 10 of the league table for local-currency bonds, executed a broad range of syndicated loans transactions in the awards period and closed W5.15 trillion-worth of local securitizations in the period under consideration. While rivals fight over the big business that is Korean banks and corporates dollar bonds, Standard Chartered has risen from nowhere to become a leading overall debt house with a truly local presence and richly deserves to be recognized as best debt house in Korea this year.
Credit Suisseis the clear choice as best equity house in Korea, not so much for the fact that it topped the league tables in 2009 and the first quarter of 2010 but because it also excelled on execution. The key theme this year was initial public offerings of life insurance companies, and Credit Suisse worked on the first, for Tong Yang, as well as the much bigger $1.6 billion deal for Korea Life in March this year. The firms work on follow-on deals was perhaps more impressive than its hitting the key IPO theme. Credit Suisse worked on two follow-on deals, a $814 million secondary offering by Hynix and a $1.03 billion deal for Woori Financial Group that priced within three weeks of each other and surprised the market in both instances by being priced at par when hefty discounts would have been the norm. Both deals priced during periods of weak sentiment in global equity markets, and for Credit Suisse to secure its client pricing at par (unprecedented in Wooris case) on secondary offerings showed excellent ability to drum up demand from international and domestic investors.
The years standout M&A transaction in Korea was the KKR-Oriental Brewery deal mentioned above, in which beverage company Anheuser-Busch InBev sold a prized asset in order to free up much-needed cashflow. Leveraged buyouts in Korea are rare enough but to finance one in May 2009 amid violent global capital markets volatility took some doing. Among the many banks working on the transaction was Nomura, which advised KKR on the M&A side and acted as joint arranger and bookrunner on the finance. The Japanese firm takes the award for best M&A house in Korea not only for having a prominent role in that deal but also for some notable sole financial adviser mandates on deals such as Lotte Shoppings acquisition of Hong Kong listed Times and the distressed Asianas sale of Daewoo Engineering to creditor Korea Development Bank. Nomura also arranged a debt-equity swap transaction for the latter. The Japanese investment bank was ranked first on Dealogics league table for announced M&A during the awards period, and deserves the accolade of best M&A house in Korea for winning mandates on the key deals as well as demonstrating an ability to advise clients across the product spectrum and back that up with underwriting where needed.
This is the year it has happened. Year after year, Public Bank has walked away with this award, driven by the power of its peerless consumer banking business; year after year, weve watched CIMB having integrated all its disparate legacy elements catching up on the rails. This is the year we believe CIMB earned not only the best investment bank title but also that of best bank.
In the 2009 financial year CIMB outstripped Public Bank on net profit and total assets. Theres no denying Public still has the best consumer business and leads the field in retail commercial banking in the SME segment; it still just about has the edge on retail asset management too. But as a universal bank, one with reach and ambition across every area of the business, and with truly regional aspiration (46% of first-quarter profit was from outside Malaysia), its time to acknowledge what CIMB has been building all this time.
CIMB today covers corporate and investment banking, consumer, treasury, insurance and asset management and does them all well, on the conventional and the Islamic side. It has more than 36,000 staff almost twice the Public Bank group, although domestically in Malaysia the figures are closer and covers 11 countries with 1,100 retail branches. And the numbers show a business going from strength to strength. First-quarter group net profit grew 36.5% year on year; return on equity is 16.5%; and it is making steady progress in consumer as well, growing 9.5% year on year in the first quarter, with total gross loans up 12.1%, retail deposits up 7.2%, mortgages up 21.8% and credit cards up 32.1%.
CIMB is also Malaysias best investment bank. Dealogic data show it at the top of the equity capital markets, M&A and local debt capital markets league tables, and third in cross-border M&A.
It is consistently on the deals that matter. On the debt side, it was a bookrunner on the $3 billion Petronas bonds and $1.5 billion sukuk, and the M$20 billion ($6 billion) Islamic MTN programme for Pengurusan Air underpinning Malaysias water consolidation initiative. In equities, it was a joint lead on the M$11.2 billion Maxis IPO southeast Asias largest ever as well as IPOs or secondaries for JCY, DIGI.com, AirAsia and Malaysia Airports and a M$1.32 billion convertible for YTL. And on M&A, apart from the Maxis restructuring, key advisories have included Hong Leong Bank on its bid for EON Capital, Astro Holdings takeover of Astro All Asia Networks, and PBB Group on its sale of Malayan Sugar Manufacturing to Felda Global Ventures.
Its also the most powerful brokerage in Malaysia.
A prolonged spell of extremely cold weather has devastated Mongolia this year, killing more than 4 million of the countrys vital livestock and depriving thousands of families of their livelihoods. It is a depressing turn of events for a country that until the winter had been poised to grow its economy rapidly as the government and foreign mining companies finally signed deals to begin extracting more of the rich mineral reserves. Beyond the general malaise caused by the tragedy, the banks have been directly affected, with the countrys largest lender, Khan Bank, likeliest to suffer heavily since it collateralizes the unfortunate livestock that are now perishing. Although analysts are concerned by the impending departure of chief executive Peter Morrow, a respected figure who has done much to promote Mongolias interests on the international conference circuit, Khan Bank is still widely regarded by independent local securities firms and market participants as having the best corporate governance and the strongest balance sheet. In October 2009 it became the first Mongolian bank ever to reach Tug 1 trillion ($693 million) in total assets, and is the first among its peers to convert all of its branches to an online real-time system. It has the largest ATM network in the country, and if it can overcome its succession issues without a decline in corporate governance standards and survive any losses from its collateralization of livestock it is best poised to benefit when Mongolia emerges from its present tragic predicament.
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MCB is Pakistans leading local bank and won this award in 2008 but it has not had the best of years. An attempt to buy RBSs Pakistan operations fell through amid regulatory concerns. Other large local lenders remain stodgy, unfocused or pedestrian, and Standard Chartered, this years best bank in Pakistan, has developed its franchise to the point where it is now a top local player. It boasts more than 4,000 employees strung across 162 branches in 41 cities. To a strong consumer and wholesale banking franchise has been added a robust sukuk and derivatives business StanChart, to the surprise of many, has become a domestic leader in both.
Add to that an Islamic banking licence the first granted to a foreign lender and Islamic banking branches and you have a local powerhouse in the making.
Key deals over the past year include sole bookrunner mandates on the largest sukuk tranche ever issued domestically by Pakistans government, worth Rs15.3 billion ($180 million), and the largest ever local bond buy-back, for Pakistan Mobile Communications. The firm has impressed local rivals with the strength of its wealth management franchise and ability to launch innovative products.
BMA Capital wins the award for best investment bank. The Karachi-based institution has had a steady year picking at the (sometimes meagre) offerings thrown up by the local capital markets.
Over the past 12 months BMA has been involved as an adviser on eight M&A deals worth $250 million and helped raise $85 million for local corporates. The group advised Martin Dow, one of Pakistans largest pharmaceuticals companies, on its $20 million acquisition of Roches local operations.
Another prime role was as financial adviser to Silkbanks January 2010 $82.2 million rights issue, and as adviser in September 2009 to South Koreas Lotte Group on its acquisition of a majority stake in local petrochemicals company Pakistan PTA.
BMA Capital is far smaller than the usual market leader the joint venture between Bank of America Merrill Lynch and KASB Securities but this year it gets Euromoneys nomination as best local investment bank.
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The Philippines Metropolitan Bank and Trust company, commonly known as Metrobank, has been focusing on improving asset quality in recent years after getting into trouble with accumulations of non-performing loans in the early part of the decade. The banks efforts have worked: the bank achieved an absolute 20.6% reduction in NPLs of Ps3.2 billion ($68.5 million) in 2009, dropping the overall ratio to 3.5% from 4.5% in 2008. Tidying up the books means investors and analysts can focus on the positives. Metrobank is now the countrys biggest universal bank, with a strong retail presence including 1,200 ATMs nationwide and more than 730 branches.
The banks net income rose 36.8% year on year in 2009. Although the industry as a whole enjoyed good results as the economy recovered from the slowdown of 2008, Metrobank deserves the award for best bank in the Philippines for demonstrating the strongest growth among its peers, for beating analysts expectations of the speed at which it was able to cut costs and raise income, and for showing that it has learned the lessons of the previous crisis.
ING retains its award for best investment bank in the Philippines. It was not a busy year for equities, so the focus was on debt transactions and advisory work. ING was the only bank ranked in the top three on the league tables for syndicated loans, local debt capital markets and M&A during the awards period, and its retention of the overall investment bank award is a testament to its overall strength across these products rather than an outstanding performance in any one of them. In M&A the bank worked on deals in the media and beverage sectors but it excelled in the power sector. It helped government-owned Power Sector Assets and Liabilities Management Company (Psalm) sell the Calaca power plant in October 2009, a transaction that the seller had unsuccessfully attempted three times previously as the government sought to privatize more assets. Also in the power sector ING advised Aboitz on a series of transactions including the $447 million acquisition of a geothermal plant and the $691 million purchase of the Pagbilao coal-fired plant. In debt, INGs strengths are as a peso bond house and as a provider of loans including a good business in export credit agency-backed finance. The banks strength as a loans house in the Philippines was underlined when San Miguel asked it to come up with a $600 million syndication in September 2009 on a tight schedule: the deal was closed within a month.
Although ING claims the overall investment banking award for its strong track record across loans, local-currency bonds and M&A, this year Euromoney is awarding a separate best debt house in the Philippines award in recognition of HSBCs unmatched performance in that product. HSBC showed its prowess in peso bonds, ranking first on the league table with Ps16.87 billion-worth of deals for a 17.9% market share. Although ING almost matched that figure in the local-currency market, HSBC also showed its abilities in taking Philippines issuers to the international dollar market by working on the $1.5 billion sovereign deal, and the debut global bond for Psalm. HSBCs rivals in Asia debt markets often say the bank is good at churning out deals but seldom innovates. The bank went some way towards disproving that reputation in the Philippines with a standout deal for unrated issuer International Container Terminal Services, the $225 million dollar deal being the first 10-year Philippines corporate bond since 2002. The deal was oversubscribed six times and the issuer was able to raise more than the $200 million initially targeted.
For the past four years this award has become a fight between DBS and Citi. DBS is the entrenched local powerhouse, the banker to almost every individual Singaporean through its ownership of the Post Office Savings Bank; the biggest in the country by revenues, profits, loans and local investment banking. Citi, with its vast and peerlessly powerful FX and transactional businesses headquartered here, is the countrys biggest financial services employer, with momentum on its side, using savvy and clever partnerships to win penetration from mainstream banking to credit cards and private wealth.
This year the award returns to DBS, which is in part a reflection of how local and international capital have behaved. Two of Citis three locally domiciled or licensed businesses suffered declines in net profit in 2009, reflecting troubled international clients transacting through Singapore, and fee and commission income was down in the core Citibank Singapore Limited bank as wealth management contracted. Yet at DBS non-interest income grew 24% in its own 2009 financial year while a record profit was driven by improvements everywhere from lending (20% of Singapore dollar loans) to deposits, investment banking and trade finance. A well-executed S$4 billion ($2.83 billion) rights issue in 2009 removed any concern about the balance sheet, and the tier 1 capital ratio now stands at a sturdy 13.4%.
It remains a tough call and DBS should not be complacent: Citi continues to gain traction across all businesses and does so with professionalism and smart ideas, which is how it has twice won this award before with half the local profits of domestic competitors. But this year the former Citibank southeast Asia chief Piyush Gupta got one over on his former employer by delivering steadiness, growth and an outstanding contribution from investment banking, reflected in the house awards below.
The award for best debt house requires a judgment call: international issuance (where Morgan Stanley was the clear leader) or local currency? As in many other Asian markets, volumes were bigger on the local-currency side than the international in 2009-10, and here as usual DBS led the league tables ahead of HSBC and Standard Chartered.
It was on every local deal that mattered: two S$1 billion deals and one of S$600 million for Temasek, covering maturities from 10 to 30 years, performing vital work in the construction of a Sing dollar credit curve; S$600 million for SingTel; and big deals for SembCorp and PSA.
But if straight local debt was all DBS could do, it wouldnt be taking the award: it also showed some presence in offshore markets with a $500 million 10-year deal for PSA; has shown syndicated finance strength in a host of key deals, including the sale of the Temasek gencos (started in previous review periods but only concluded in this one); and helped to coordinate refinancing for groups including PSA, Singtel, Noble and Olam.
Singapores most significant equity deal of the past 12 months has been the CapitaMalls Asia IPO, raising S$2.8 billion in a powerful illustration of regional recovery. The four leads on that deal JPMorgan, DBS, Credit Suisse and Deutsche Bank are also the candidates for this award.
Each can make a decent claim: JPMorgan turned up on a host of ECM deals, including a $1 billion rights issue for Neptune Orient Lines and big convertibles for Olam and Yanlord; Credit Suisses landmark was a sole books role on a S$1.2 billion convertible for CapitaLand the largest convertible from Asia in our review period; DBS did comfortably the most deals (17), and won roles on the big rights issues for CapitaCommercial Trust, CitySpring Infrastructure Trust, Neptune Orient Lines and Genting Singapore; and Deutsche did well in support of Avago Technologies, which launched both an IPO and a follow-on in our review period.
Each can make a case but DBS wins the day not only for bringing the most people to market but also for demonstrating its links with Singapores most important corporate clients by winning roles on one rights issue after another the key theme of our review period.
Judging M&A in Singapore is treacherous. UBS leads the league tables but chiefly representing non-Singaporeans (Eircom, UBS) in which Singaporean wealth funds (Temasek and GIC respectively) happened to be taking stakes. Strip out those advisory roles to the targets on outbound transactions and Macquarie moves to the top but really for just one deal, advising Temasek on the Eircom acquisition. Deutsche makes a strong case, advising on PetroChinas acquisition of Singapore Petroleum and the sale of Chartered Semiconductor to ATIC of Abu Dhabi.
But eventually Morgan Stanley wins the day by advising on the greatest range of significant deals. It was alongside Deutsche advising Chartered Semi on the ATIC deal; it was on the target side of Capitalands acquisition of Orient Overseas Developments in China; it is advising Temasek the top client to have in Singapore on a C$500 million ($477 million) deal to buy Canadas Inmet Mining; and has twice advised Singapores Asia Pacific Breweries on acquisitions: of Multi Bintang Indonesia and Grande Brasserie de Nouvelle-Calédonie in New Caledonia.
Crucial to Sri Lankas economic future is a solid banking system, and no lender has proved itself more capable over the past year than Hatton National Bank (HNB).
The privately run Colombo-based lender, which recently celebrated its 120th birthday, posted pre-tax earnings of Rs5.9 billion ($52 million) for the full year 2009, up 24% year on year, on income of Rs39.4 billion not bad for a lender banking an economy in free fall for much of the past two years.
HNB also paid a full-year 2009 dividend of Rs18.47, up 36% on 2008. Tier 1 capital rose by about two percentage points, to 11.1%, with non-performing assets falling by the same measure, to 6%. Hattons key local rivals, notably Commercial Bank of Ceylon, had a more troubled year, posting a 4% drop in pre-tax profit in 2009 on lower income.
This year has also started strongly, with HNB reporting pre-tax earnings of Rs1.2 billion in the first quarter, slightly up on 2009 figures, with net interest income rising 5% to Rs3.6 billion.
Taiwans banks have been among Asias least profitable for some years, with a small and overbanked domestic market still full of stodgy state-owned institutions. The possibility of expansion overseas, especially into China, offers a way for them to build profitability, as do long-sought synergies from getting customers to buy products from other parts of the larger financial conglomerates that the leading banks all belong to. Fubon Financial Holdings is the leader in both of these promising fields, and its banking unit, Taipei Fubon Bank, is the best bank in Taiwan. This year foreign challengers such as Citi continued to press the local institutions by offering superior service and more sophisticated products such as transaction banking but none has yet reached the scale to be a serious threat to the locals in the way Citi challenges the likes of DBS in Singapore. Fubon, meanwhile, wins praise from analysts for moving early and deftly into the most promising area of mainland China banking, through its acquisition of Xiamen Bank in the city of the same name that has close ties with Taiwan. The group has spent the period since the acquisition consolidating its lead among Taiwanese banks in China, and consolidated that lead by winning permission to open yet more branches in Fuzhou. While all of the leading banks in Taiwan reported falls in revenues in 2009 as net interest income declined, Fubon managed to boost its capital adequacy ratio to 11.96%. The parent group was the countrys most profitable financial holding company in the first four months of 2010, reinforcing the analyst consensus that it has the soundest strategy and the best chance of establishing a lasting foothold in the difficult mainland market.
Last year Euromoney recognized just one firm for investment banking in Taiwan, with Goldman Sachs taking the award in recognition of its overall prowess in a small market. This year the market shrank further, with issuance of bonds down in particular, but we are splitting up the awards into the investment banking products because there was no clear overall winner across the three.
The debt markets in Taiwan are still a largely local affair, with few sizeable US dollar transactions. In this years awards period the loan market was also significantly more active than the bond market, so the best debt house would need to have helped clients with both. The only company to rank in the top five in both debt products was Fubon Financial, which was bookrunner on an equivalent of $2.2 billion-worth of loans and $735 million of bonds for rankings of fourth and fifth respectively. The firms success in the debt markets is a recent phenomenon, having been the 18th-ranked house in 2007, but the relative financial stability of Fubon Financial Holdings has encouraged clients and the firm has closed some key transactions. Fubon worked on three of the seven structured finance deals that closed during the awards period. It hit the key theme of Taiwanese companies looking for capital to expand in China, for example in arranging two syndications for Hong Kong-listed Ju Teng Group worth $240 million that were collectively oversubscribed by 178.5%, and it managed to increase the volume of bonds it ran on a year-on-year basis even as the market shrank by 18%.
Credit Suisse was the leading equity house in Taiwan in the period under consideration, advising on seven out of 14 transactions for a total volume of $874 million: twice the total value and three times the number of deals as its closest competitor. It was also the sole bookrunner on all but one of those deals, which although they were all small suggests a degree of trust on the part of the firms clients. The largest deal was the $312 million of global depositary receipts for computer memory chipmaker Inotera Memories. As well as two other GDR deals, Credit Suisse demonstrated its skills by completing two block equity sales and two exchangeable bond deals.
In M&A as in banking, the dominant theme in practice, in the media and in politics this year in Taiwan was cross-border opportunities in China. Two pioneering deals in this space were hijacked by political debate. China Mobiles attempts to invest in Taiwans FarEasTone and the sale of insurer Nan Shan to Hong-Kong based Primus and China Strategic both faced hostile reactions from parties in Taiwan that are suspicious of China-Taiwan business relations as a precursor to a full integration of the two countries.
Advising on deals in this climate was thus a tricky proposition, and Morgan Stanley deserves the award for best M&A house in Taiwan for working on the right side of the key deals. It stepped in to handle the sale of Nan Shan, owned by AIG, and secured an impressive $2.2 billion in cash when media reports at the time suggested that any figure above $2 billion would be difficult to achieve. Subsequent reports (including an article in Euromoneys April 2009 issue) have raised questions about the involvement of Chinese mainland money in Primuss partner, China Strategic, but sources close to the deal say they have seen the passports of all the investors and each holds a non-PRC document. The deal had not yet closed at the time of going to press but Morgan Stanley can be satisfied with its work so far on the deal as well as its role in Taishins $882 million sale of its securities firm to KGI Securities. These were two deals on which it paid to be on the sell side, and whatever the outcome of the Nan Shan/Primus deal looking promising at the time of going to press Morgan Stanley deserves the title of best M&A house in the challenging Taiwanese market.
Despite the much-publicized political problems afflicting the country this year and last, Thailands banks have performed well by growing the fee-earning businesses that had until recently formed only a small part of their revenues. Kasikornbank is leading this trend. The consumer market is the key growth area in Thailand, with customers increasingly using credit cards and buying such products as life insurance and mutual funds. Although last years winner, Siam Commercial Bank, had another strong year, analysts say that Kasikornbank is marginally ahead of it in grasping this fee-income opportunity. In 2009 the bank improved earnings thanks to consolidation of a stake in life insurer Muang Thai and increased interest income, with return on equity at 12.6% and a healthy enough tier 1 ratio of 10.8%.
Vietnams banks battled with a difficult task in 2009 and early 2010 as devaluation of the dong, mediocre GDP growth and a lack of liquidity made for a tough environment. Against this background several banks managed to perform well, including last years winner Asia Commercial Bank. However its smaller rival, Vietnam Technological and Commercial joint-stock bank, or Techcombank, deserves this years award for best bank in Vietnam for its superior performance. The two banks are, interestingly, backed by regional rivals: Standard Chartered owns a stake in the publicly listed ACB, and HSBC owns 20% of Techcombank.
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