Premier League of Asian investment banking: The banks battling to get into the big league

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By:
Clive Horwood, Lawrence White
Published on:
How to score in Asia’s markets
The banks battling to get into the big league
How we calculated the Asia Premier League
Bank of America Merrill LynchBarclays Capital
CitiCredit Suisse
Deutsche BankGoldman Sachs
HSBCJP Morgan
Morgan StanleyNomura
Standard Chartered UBS

  

Asian investment banking’s dream team

Deciding a cut-off point for Asia’s top investment banking franchises was not easy; several of the firms outside our top 12 might feel that their businesses are very nearly equivalent to those who scraped in to the lower rankings.


Probably closest to inclusion was RBS, which, despite the sneers of regional rivals that say the UK bank is out for the count, says it is fully committed to Asia and indeed already making good money. Regional chief executive John McCormick is bullish on the opportunities for his firm, which centre on the bank’s solid primary debt and fixed-income trading platforms. The bank has built up most momentum in the more developed markets of Australia, Japan and Korea, where demand for its expertise in FX and credit products are strongest. The next step will be to expand the bank’s equities offerings in both the primary and secondary businesses, and more broadly to convince clients that the damage suffered by the bank’s global franchise as a result of losses in the west has not permanently reduced its execution capabilities or its focus in Asia.

BNP Paribas has built out from its strong derivatives trading hubs in Hong Kong and Tokyo, developing a cash markets platform to match its strong structured products trading capabilities rather than following the more traditional path of getting the simpler cash business in place first. The bank is also growing its local-markets primary debt capabilities as it develops more onshore presence in such markets as Singapore, Korea and Indonesia, so that it most resembles an embryonic Deutsche Bank in Asia with local banking units in key countries allowing sales and trading, and debt bookrunning to grow in sync. The next step, say sources at the bank, will be to develop an effective e-channel for the bank’s FX offering and to grow its coverage of so-called real-money investors such as asset managers, central banks and sovereign wealth funds.

Société Générale has just completed a shift from a geographically centred model that had Australia, Japan and emerging Asia operating semi-autonomously to a more cohesive pan-Asia model. Although the bank has little traction in pure investment banking, its asset management platform brings it plenty of access to sophisticated investors in Asia. The challenge is to translate the firm’s former success in the structured products business to the new growth market of more simple, flow-based trading. In plain language, it must move from being brilliant at the complex stuff to being good at the simple things, since that is where the money is for now. The bank positions its markets teams carefully, with the commodities team based out of the key Singapore hub, and the FX team going against the grain by being based in Hong Kong (rather than Singapore) while the bank builds its reputation. The challenge for the bank will be to fight for market share in the already extremely competitive flow businesses – that is, mainly, the trading of simple credit and FX products – and to rebrand as an all-rounder rather than a brainy derivatives house.

ANZ has launched an aggressive banking expansion in Asia under the leadership of former HSBC Asia head Mike Smith (see Banking: ANZ shoots straight for Asia, Euromoney, April 2010), and while he says the bank won’t be doing much M&A or equities underwriting it will develop a larger debt capital markets and sales and trading platform. Rather than striving to become a top-tier investment bank, the aim is to be a solid sales and trading and primary debt house... something that is certainly achievable.

Macquarie is trying to build an international capital markets business, and is worth watching. Daiwa Securities is trying to follow Nomura’s lead in expanding outside Japan but faces a long and difficult struggle against heavy odds.