INDONESIA
BEST BANK
Bank Central Asia
Indonesia is a tough place to bank. Operating a branch network across an archipelago of more than 15,000 islands, home to 240 million people, is a costly proposition — and one that places a premium on efficiency, which is where Bank Central Asia excels.
BCA is the leading transaction bank in Indonesia and has one of the lowest operating costs in the industry, at around 3% of its total assets for the year to March. A large customer base helps it to achieve the lowest cost of funds among the country’s main banks and it runs the leanest operation, delivering the highest levels of productivity from its staff. Return on equity is consistently around 30%.
The bank’s strong management also shows through in the quality of its underwriting. Despite growing its loan book by 26.7% and profit by 25.5% during the past year, BCA maintains the smallest non-performing loan portfolio of the big banks at 0.4% of total loans.
BCA’s growth strategy is targeted at the consumer loan sector, mostly in the form of mortgages and auto loans to Indonesia’s growing middle class. Its consumer loan book grew by 34.4% during the period, but it also has significant relationships with Indonesian businesses and grew its loans to SMEs by 30.2%.
Despite being extremely well run, BCA is not a minnow. It is the third-biggest bank in Indonesia by assets and deposits, and is the biggest private lender in the country. It accounted for 11.5% of system deposits and 20% of system savings at end-2012.
Overall, this is a bank that delivers high-quality growth in a challenging market.
BEST INVESTMENT BANK, BEST BOND HOUSE, BEST EQUITY HOUSE
Mandiri Sekuritas
Mandiri had another good year in Indonesia, topping Dealogic’s league tables for the period under review in both debt and equity capital markets. In ECM, it underwrote seven of the biggest and most prized IPOs of the period, including a successful Rp390 billion ($126 million) offering for Waskita Karya, a state-owned construction company.
It was also lead domestic manager on the Rp590 billion IPO of Express Group, an Indonesian taxi company, on which J.P. Morgan acted as sole global coordinator. It had a 12.6% share of the IPO market, according to Dealogic, and was also the leading domestic house on secondary offerings.
Mandiri also has a solid equities franchise to support its capital markets business. Its brokerage volumes have more than doubled during the past year and are bigger than any of its rivals, while its equity research team covers 76% of Indonesia’s total market capitalisation, both of which help it to provide clients with a good understanding of the local market.
The bank was similarly strong in DCM. It was the country’s biggest bond trader during 2012, with an 11.4% market share on the IDX, beating out competition from rivals Danareksa and Bahana.
It was also the leading bond underwriter, with a 19.2% market share in rupiah-denominated deals. Highlights included an extremely popular bond for Agung Podomoro Land, a leading Indonesian property development company, which attracted strong demand and enabled the company to raise Rp1.2 trillion. It also acted as joint lead on Jaya Ancol’s Rp300 billion dual-tranche bond.
BEST FOREIGN EXCHANGE BANK
Bank Mandiri
Mandiri provides a vast number of foreign exchange products and customised solutions across cash transactions, hedging products and investment products. The bank’s latest service is Mandiri e-fx, a web based application that enables branches and customers perform foreign exchange transactions in real time. Settlement executes directly as well.
Mandiri’s treasury business operates 12 dealing rooms and also has 29 sub-regional treasury marketing offices in 21 cities, while the bank runs 99 money changers that provide competitive prices for bank notes transactions. Overall, the treasury business handles roughly 34,000 transactions a day with a total volume of around $1.1 billion. These include the transactions with customers as well as FX interbank, fixed income and money market transactions.
BEST FOREIGN COMMERCIAL BANK
Citi
Citi Indonesia boosted its total assets in Indonesia by 5% to Rp61.8 trillion for the 2012 financial year, while boasting a capital adequacy ratio of 23.76%, far above the central bank minimum requirement of 8%. Return on equity is a healthy 16.7%.
HSBC has a slightly bigger asset base in the country than Citi, but the US bank is more profitable, earning the equivalent of almost $200 million during 2012, compared to $161 million for HSBC.
Citi is also the only onshore bank with a fully integrated global markets platform, offering solutions across rates, currencies, commodities, credit, equities, hybrid and capital markets origination and distribution. It is also the only foreign bank mandated by the Republic of Indonesia as a selling agent for all the government’s retail bonds, both on conventional and Islamic.
In the cash management sector, Citi launched a mobile platform that lets authorised customers approve transactions on their Blackberry, IPad, Android and other smartphones. It also provides supplier finance through a single integrated online channel for buyers such as Nestle, Unilever and Frisian Flag.
A two-year ban on new credit card issuance also ended during the review period, allowing Citi to further improve its position next year.
BEST FOREIGN INVESTMENT BANK
Credit Suisse
Indonesia is firmly entrenched in Credit Suisse’s corporate DNA. Its heads of investment banking for Asia and Southeast Asia are both former heads of Indonesia, and Eric Varvel, the global head of investment banking, was chief representative in Indonesia back in the mid-1990s.
That level of senior management understanding is clearly unique to Credit Suisse, and is evidenced by its consistently strong performance in the country.
In debt, Indonesia’s move to investment grade has created a gulf between the now-straightforward sovereign deals that many international banks chase after and the high-yield business that is dominated by Credit Suisse. Deals included offerings from Gajah Tunggal, Lippo Karawaci and Japfa Comfeed.
Morgan Stanley had the best year in Indonesian equity transactions, but Credit Suisse is a close competitor. It was the only bank to win a role on both of BCA’s treasury deals and was also active on deals for Sarana Menara Nusantara, Indosiar Media Karya and Dharma Satya Nusantara.
In M&A, it advised Overseas Union Enterprise in its losing $10.2 billion bid for Fraser & Neave in Singapore, including a $9.8 billion loan commitment, and it is also waiting for approval to close DBS’s $7.3 billion acquisition of Danamon. None of that translated into league-table credit for the period under review, but it is a testament to the bank’s strength in the country.
The bank also claims that the revenue it earns from its Equity Upside transactions, such as warrants attached to loans, could far exceed the revenues (according to Dealogic) of any of its competitors.
KOREA
BEST BANK
Shinhan Bank
Korea’s third-biggest bank by asset size saw the best stock-price performance, making it the biggest bank by market capitalisation, at KRW18.4 trillion.
This reflects improving fundamentals versus its main competitors. The past year has been tough for Korean banks. They are all suffering from falling profits, declining return on equity, and declining net interest margins. A slowing economy and a tough export environment has hit the banks hard, and as a group they are reducing loans and increasing deposit levels.
Shinhan has used this period to improve its balance sheet. It has boosted tier-1 capital to 12.6%, the highest among the big Korean lenders. Its BIS ratio is also the highest reserve. And its net income, at W1.7 trillion, beats KB and Woori by a narrow margin, and Hana by a lot, according to SNL Financial.
Demonstrating initiative at a qualitative as well as a quantitative level, the bank has created an early warning system for household and SME debts and business owners. This is to make sure the bank is not caught by surprise should the economic slowdown damage loan portfolios.
Shinhan has not been the number-one bank in corporate and investment banking, nor in wealth management. But it is using this period to invest heavily in those fields, and it is showing progress, for example in public and corporate pensions, where it is using the integrated Shinhan Financial Group to grow its share of the market.
BEST EQUITIES HOUSE, BEST INVESTMENT BANK
KDB Daewoo Securities
KDB Daewoo is ranked second among Korean-based firms for domestic equity-capital market deals by volume, according to Dealogic. It is not the biggest house but it seems to crop up in FinanceAsia’s coverage of deals — meaning it is doing more than just purely domestic work.
While brokerage and wealth-management businesses slowed down, investment banking has enjoyed rising revenues on the back of greater commissions from IPOs and rights offerings, even as the equity market has remained challenging. Sales and trading in equities has remained steady (although it has declined in bonds). Net profits at KDB Daewoo overall have been on the rise, according to the firm’s financial data. It now accounts for 29% of domestic IPO market share.
Among the deals in the period accounted for, KDB Daewoo was a joint global coordinator and bookrunner on cable TV provider CJ HelloVision’s W293 billion IPO in November, the biggest of the year.
It also participated in several big rights offerings, including two in December: a W74 billion deal for Lotte Insurance and Hyundai Merchant Marine’s W197 billion trade.
Under CEO Kim Kibum, KDB Daewoo is also making forays into new markets. The firm is at the forefront of Korea’s nascent prime brokerage industry, and boasts the largest dedicated team in Seoul, with 18 professionals.
It is also expanding regionally, having acquired an additional stake in Indonesia’s online brokerage eTrading Securities in April. That deal should take KDB Daewoo’s ownership up to 80%. In China, it is applying for a licence to invest in local securities, on the back of a rep office in Shanghai. And it has forged an alliance with Fortune Link Fund Management in Shenzhen to invest in Chinese private equity.
It is possible that KDB Daewoo Securities is too successful: rumours have surfaced in the local press that parent KDB Financial Group might sell the business to raise money. KDB Financial has its own investment bank, and is active on the debt side. That could be a challenge for next year’s awards, but for now, KDB Daewoo Securities remains a player to watch.
BEST FOREIGN EXCHANGE BANK
Korea Exchange Bank
KEB, now a unit of Hana Financial Group, is an established player in Korea’s foreign exchange markets. Yet it continues to innovate.
At the corporate level, it has introduced web-based FX dealing services. It is also rolling out margin trading as companies and individuals seek to use currency as an investment vehicle.
KEB provides companies with vanilla hedging tools, such as short-term and long-term forwards, swaps and options. It also has developed structured hedging tools, often in the form of zero-cost options, by combining the buying and selling of calls and puts, for US dollars, euros and yen. Such tools have become even more essential to corporations as Abenomics have rocked won/yen rates.
On the operational front, KEB is working with the government to introduce continuous linked settlement of the won for 10 Korean banks, accounting for 74% of local banks’ CLS volume as of December 31. It is helping brokers, insurers and other financial institutions adopt this platform.
“We are lucky to have KEB as our banking partner,” writes one client from a major Korean corporate group. “We do expect that the bank will solidify its market position, and improve its services.”
BEST FOREIGN COMMERCIAL BANK
HSBC
HSBC is not the biggest foreign bank operating in Korea but, relative to its size, its financial highlights have been the best in an overall tough environment.
Net profit is down by $10 million, a far smaller drop than rivals’. Similarly, return on equity is down -1.4% year on year to end 2013, a modest decline in comparison. Its net interest margin is actually up: although a barely perceptible .02% improvement year on year, at least it’s in the black. It has managed to hold on to its deposit base while modestly decreasing the loan book, a milder version of what is taking place among banks generally in Korea.
Nonetheless it has been active providing hedging services to companies, notably payoffs linked to global equity indices. A popular structure over the past 12 months has been an auto-callable equity swap with low knock-in barriers. These serve institutional clients, who seek enhanced yields with moderate risk, and local brokers playing exotic equity derivative positions.
And while lending is slightly down, HSBC continues to put its balance sheet to work for an impressive list of corporate clients, helping them secure financing in won, US dollars, euros, renminbi, Thai baht and other currencies; it has put its strategic position in China to work in the form of various innovative RMB cash lending solutions. The bank has served as sole coordinator for a long list of project and export-finance deals. Overall it has won 120 new corporate customers during the past 12 months.
BEST FOREIGN INVESTMENT BANK
Goldman Sachs
Advisory work continues to be at the fore in South Korea. Goldman Sachs was involved in the two biggest domestic deals. It served as sole sell-side adviser to Woongjin Holdings for the sale of its asset Coway, and sole buy-side adviser to Lotte Shopping for the acquisition of retail chain Himart.
Both of these were messy deals. A spat between Himart’s corporate parent, Eugene Group, and Himart’s chairman exploded into the press when a preferred bidder, private-equity firm MBK, generated negative reaction. Lotte had been eyeing the prize, and waited for its turn to pounce.
Woongjin, a troubled consumer durables rental company, had to sell its crown jewel, Coway, to raise money to deal with problems elsewhere. Goldman got more than it bargained for when, having helped line up credible buyers, Woongjin’s founder chairman backed away, a change of sentiment played out loudly in the local press. It wasn’t just Coway at stake, but Goldman’s credibility. The chairman was coaxed back to the table and Coway was sold to MBK.
Other firms played high-stakes roles in Korean M&A, but Goldman also completed a respectable amount of equity and equity-linked deals, as well as helped Korea Development Bank achieve the lowest coupon ever from a Korean issuer in the US dollar bond markets.
MALAYSIA
BEST BANK
Public Bank
Public Bank takes home this award again this year, as it continues to distinguish itself from main rivals in Malaysia. It is recognised for its track record of strong and consistent profitability, prudent management, as well as for its focus on shareholder value.
Last year, Public Bank’s net profit grew by 5% from a year earlier, and its domestic gross loans, advances and financing increased by 12.5% with the market share of 16.7%. Its net return on equity stood at 24.5%, while the non-performing loans ratio further improved to 0.7%.
The bank paid out 45.3% of its profits to shareholders in 2012, and that translated into a net dividend yield of 3.1%. If a shareholder bought 1,000 shares in Public Bank when it listed in 1967 and subscribed for all rights issues since then, the person would have earned a compound annual rate of return of 19.5%, according to the bank.
To acquire new customers and to cross-sell products to its existing customer base, Public Bank also launched a number of new services and products last year.
In August, the bank, together with ING, launched a savings endowment plan, which generated sales premium amounting to M$40.3 million in 2012. In October, ING Public Takaful Ehsan, a joint venture with ING Management Holdings, launched the employee benefits plan for small- and medium-sized enterprises, and small and medium industry.
Meanwhile, Public Mutual launched six private retirement scheme funds in November, comprising three conventional series and three Shariah-based series. It also launched a total of nine new unit trust funds, which increased the number of funds to 101 as of the end of March this year.
BEST BOND HOUSE, BEST EQUITY HOUSE, BEST INVESTMENT BANK
CIMB
CIMB is Malaysia’s leader in investment banking, and it demonstrated another round of strong performance during the review period.
The bank captured the top position of Dealogic’s equities league table during that time, as well as for ringgit-denominated Malaysia bond deals. In equities, the bank acted as a joint global coordinator and joint principal adviser for Felda Global Ventures’ $3.3 billion IPO in June of last year, as well as for Astro Malaysia’s $1.5 billion IPO in October. The bank was the principal adviser and a joint global coordinator for IHH Healthcare’s offering in July.
In local-currency denominated bonds, CIMB executed slightly fewer deals than its closest competitor Maybank during the award period, but recorded a bigger total deal value. Among key deals, CIMB played the role of a joint lead manager for Celcom Transmission’s M$5 billion Sukuk Murabahah programme and issuance in August last year. The bank was also the sole principal adviser to DanaInfra Nasional’s Islamic Commercial papers and Islamic medium term notes programmes, guaranteed by the Government of Malaysia.
In M&A, highlights during the review period included its role as the financial adviser and sole bookrunner for the privatization of both QSR Brands and KFC Holdings (Malaysia) through the acquisition of substantially all their assets and liability by Triple Platform.
Unusually in the Malaysian market, CIMB operates a full-fledged fixed-income syndicate desk and a dedicated DCM team focusing solely on fixed-income products. The bank has a very active structured investments and interest-rate derivatives presence both in the conventional and Islamic markets, which complements its fixed-income business.
The bank is also an active provider of derivative hedging solutions for its corporate and financial institution clients. It also provides prices to other bank swap counterparties, and adds value by making market in sizes and in tenors where other swap counterparties are unwilling to deal in.
On top of its strong presence in Malaysia, it is also expanding its reach in the region. After the completion of its acquisition of RBS’s Asia Pacific investment banking business at the end of 2012, CIMB group will have operations in a total of 16 countries in Asia Pacific, as well as equities sales teams in London and New York.
Through the acquisition, the bank gained new on-shore footprint in Australia and Taiwan and expanded its existing presence in China and Hong Kong. It also not only bolstered the bank’s M&A platform, but also allowed it to derive synergy that complements its debt market franchise.
BEST FOREIGN COMMERCIAL BANK
HSBC
HSBC’s Malaysia business continues to be profitable, with a 20.5% average return on equity during 2012. The bank now has 68 branches nationwide (42 conventional and 26 Amanah), becoming the foreign bank with the widest branch and delivery network in the country as of the end of last year.
With a pre-tax profit of M$1.4 billion last year, HSBC stands out among foreign banks there. UOB booked M$1.2 billion that year, while OCBC logged M$1 billion and Citi posted M$790 million. But the competition is certainly getting fierce in the Southeast Asian country - UOB surpassed HSBC in terms of customer deposits last year with M$65.6 billion, compared to HSBC’s M$51.3 billion.
Still, HSBC has a solid footing in the country across businesses, and is continuing to build on its strength.
Last year, the bank’s corporate segment landed project financing deals - previously an untapped income source for its commercial banking - which reflected the increasing focus of driving cross-segment revenue growth with its global banking and markets team.
Meanwhile, HSBC is one of the leading sub-custody and clearing providers in Malaysia, handling more than 50% of foreign investment for equities and more than 65% for fixed-income instruments. It has been providing the services to the local market since 1970.
The bank also maintained its position as the leading foreign bookrunner for ringgit-denominated bond deals during the review period.
BEST FOREIGN INVESTMENT BANK
Goldman Sachs
Goldman Sachs continues to build on its foothold in Malaysia, and is recognised for its solid performance across the range of products. Once again, this was a competitive category, and on a closer look the US bank was particularly strong on the debt side during the review period, while other international peers such as Deutsche Bank and Credit Suisse were stronger in equities.
Goldman ranked the top on Dealogic’s US dollar-denominated Malaysia DCM league table, with the total deal value logging more than six times that of the closest competitor. Highlights included its bookrunner and arranger role for 1Malaysia Development Berhad’s high-profile $3 billion notes by 1MDB Global Investments in March this year. The bank was the sole bookrunner for the State Government of Sarawak’s $800 million guaranteed secured notes by SSG Resources.
Goldman continued to be competitive in M&As as well. It acted as the sole financial advisor to 1Malaysia Development Berhad on its acquisition of Mastika Lagenda, and played a joint financial advisor role to SapuraKencana Petroleum on its merger with Seadrill. The bank was also a joint financial adviser to ING in AIA Group’s acquisition of ING Management Holdings.
In equities, highlights for Goldman included its role as a joint global coordinator and bookrunner for Astro Malaysia’s $1.5 billion IPO in October last year, and its role as a joint bookrunner for IHH Healthcare’s offering in July. As investors braced for the general elections in early May this year, which were expected to be close, the activity in the IPO market was quieter in the latter part of the review period.
Like its peers in the country, Goldman’s business in Malaysia is underpinned by its relationships with clients, and that, combined with its broad range of product offerings, makes it stand out for this award category.
