Awards for Excellence 2017: HSBC
The tense Middle Eastern political environment that affects so many countries in the region has not spared Oman, as it continues to reckon with a civil war at its borders in neighbouring Yemen. But Oman’s economy and banking sector have also benefited from Iran’s opening. Oman, which hosted the first talks with Iran over a nuclear agreement, was also one of the first countries to benefit from the eventual signing of that deal.
That makes HSBC Bank Oman look well-placed to deliver on hopes for growth. Over the past 12 months it has posted a stellar performance, enough to claim the title of best bank in Oman from perennial winner Bank Muscat.
HSBC is hardly new to Oman, having had a presence in the sultanate since 1948. But it was only from June 2012, when its Omani operations merged with Oman International Bank to form HSBC Bank Oman, that the firm became one of the country’s top financial institutions.
HSBC Bank Oman really came into its own in 2016, when the bank experienced loan growth of 18%, much higher than the 7.5% growth in the Omani banking sector as a whole. It also cut costs by 11.5% and achieved a capital adequacy ratio of 18.7%.
Although Bank Muscat is still much larger, HSBC is making waves as a dynamic outsider with spectacular growth. Its net profit was up 31% – to OR21 million ($54.6 million) – while its return on tangible common equity rose from 4.3% to 5.6%. In 2012, it stood at just 2.9% – an indication of how far the bank has come since the merger.
Its retail banking and wealth management divisions serve more than 200,000 customers. These clients are increasingly turning to HSBC’s digital offering. After upgrades to the mobile banking application and call centre, customer digital engagement rose to 42% over the year.
This year Qatar is another country where the regional investment-banking leadership of HSBC shows through. Its bond franchise in Qatar included a repeat mandate from the sovereign in May, at the time the largest-ever bond issue from the region.
In the corporate space, it was global coordinator on telecom firm Ooredoo’s $500 million bond and $500 million senior unsecured revolving credit facility. It acted on both a debut and repeat bond from real estate developer Ezdan. It was sole coordinator on a $650 million revolving credit facility for Katara Hospitality and was active in financings for Nebras Power and Qatari Diar. It also single-handedly provided a $2 billion 25-year rates hedge for the Umm Al Houl Power Company.
Its financial institution deals include a bond for QNB, Commercial Bank and two for Ahli Bank Qatar. It was global coordinator on three of these. Qatar Insurance Company’s $450 million tier-2 perpetual bond was the Middle East’s first ever insurance Eurobond. HSBC was global coordinator.
HSBC’s advisory and equity financing work for Qatar Airways also stands out. It was sole financial adviser and broker on the airline’s $613 million purchase of 10% of Latam Airlines and its stepped $2.7 billion purchase of a 20% stake in IAG, which it facilitated by refinancing and upsizing an existing loan facility.
Investment banks both domestic and foreign are positioning themselves to work on the most important deals to come out of this era of transformation. At the moment, none is better equipped for it than HSBC, which has long had a presence in Saudi Arabia and has shown that it is capable of delivering on that.
Already the Kingdom looks to be relying on HSBC for some of its landmark transactions. The bank was a global coordinator on Saudi Arabia’s debut sovereign bond last year, a deal that stunned the market by its size and oversubscription levels.
Under the leadership of Majed Najim, HSBC Saudi Arabia’s CEO, the bank has also been hired to work on the initial public offering of Saudi Aramco, a listing that may take place over the coming year and is expected to be one of the largest, if not the largest, IPO ever conducted.
The last year has not been all easy for HSBC. Its total assets declined slightly, while its net income fell from SR279 million in 2015 to SR140 million in 2016. This is the result of a difficult transition, as the country tries to overcome the liquidity issues produced by a halving of the price of oil.
Still, and in spite of these setbacks, HSBC’s work on such deals as the sovereign bond and continued efforts to feature on the landmark transactions to come sets it apart from its rivals and puts it in good position for the future.
HSBC is by some distance the most powerful and able bank in Hong Kong, particularly when subsidiary Hang Seng is taken into account. The Hong Kong operations of HSBC created HK$166 billion ($21.3 billion) of revenues in 2016. Although net profit was down, to HK$87.8 billion, it still dwarfed any comparable institution, and did so at a return on equity of 13%.
Key developments over the last 12 months have come in the retail and wealth management area, where the bank has continued to invest in digital and mobile channels, offering Apple Pay and Android Pay during the year. New mutual funds, structured products and wealth insurance have been developed, some of them leveraging on the bank’s leadership in renminbi bond investments.
The bank’s traditional commercial banking strengths are as robust as ever and Hong Kong is the heart of HSBC’s private banking offering for the region, accounting for 80% of Asia’s pre-tax profits for the division. Hong Kong is also the home of the bank’s trade finance strength, where renminbi internationalization is providing a spur to new business.
HSBC’s investment banking strength in the region is anchored by its Hong Kong-based debt capital markets dominance. It is easily the number one G3 bookrunner for Greater China and Hong Kong issuers, and obviously the leader for Hong Kong dollar bonds.
But it is more than just a debt factory. Interesting deals in the awards period have included perpetual hybrids for Li & Fung and Road King Infrastructure, green bonds for MTR and a sukuk for the Hong Kong government. HSBC is not a leader in equity capital markets in the region but nevertheless raised $14 billion for clients in the Hong Kong ECM, with senior (if not the most senior) roles on the IPOs of Postal Savings Bank of China, Guotai Junan, CR Pharmaceutical and, on the equity-linked side, Haitong International.
Big M&A mandates in Hong Kong included the acquisition of Citic Group’s property portfolio by China Overseas Land & Investment and the privatization of New World China Land.